Revision of the debt exchange program/Restructuring has become necessary following public outcry and absolute discretion of business, households and other related institutions. This exercise had to come about as a conditionality from the IMF following a staff level agreement with Ghana a couple weeks ago which is as a result of consistent fiscal reckless such as high deficit arousing from expenditures such as outrageous allocations to the OGM, fantasy social intervention programs, flagrant abuse of the procurement regime and corruption couple with low revenue mobilization. Due to the rising interest rate which is now 58% of entire revenue and 18% of GDP couple with other mandatory expenditures of government such as emoluments has eroded the fiscal space thereby subduing growth.
This program seeks to restructure 138 billion cedis of public debt of which 80% of it may be declared successful program so as to achieve debt sustainability to be able to acquire a bailout from the IMF.
In this regard government targeted investors who had invested in government instrument such as Treasury bills,ESLA bonds, Daakye bonds etc through fund managers,banks,pensionentities individuals etc with much higher confidence in government instrument /bonds this time around due to financial sector crises between 2018 and 2019.
These bond holders who are supposed to redeemed their investment being the principal and interest had now have to take a hit on their interest and also got their principal locked up with government until 2038.
These certainly will result in a lot of challenges for financial institutions as their profits and capital will take a hit together with several business entities who hold those instrument, this likely to result in massive layoffs and low productivity thereby affecting growth. This measure will also be very debilitating for households with pensioners, individuals bond holders because of the back loaded interest rate of 0%coupon in 2023, 5%in2024, 10%in 2025 and beyond, couple with high inflatlationary expectations in the medium term
We expect government to rethink about how he is dealing with local investors considering how this program lack information, proper consultation,shrouded with secrecy and lacks parliamentary approval as people may even loose confidence in Treasury bills which has always been used in paying emoluments which is a non discretionary expenditure of government. The special attention being appointment of consultant etc to spearhead negotiations with Paris club of lenders , overseas investor community and bilateral agreements should also be extended to the local front to ensure a successful program to restore the economy on a sustainable path.
We are also urging the government to avert his attention to bilateral financing agreements for restructuring /debt suspension which will also affect project financing under that category, for us not to loose confidence in the commercial lending community whom we are looking forward to finance a budget deficit of 65billion cedis this year(2023). Similarly government public expenditure ought to be rationalize with immediate effect to reduce to reduce the debilitating impact of this debt exchange program which can facilitate a front loading of interest payment to local investors in the short to medium term.
Michael Ofoei Akorli
Deputy Eastern Regional
Communication officer
Source:Mybrytfmonline.com/Kwabena Nyarko Abronoma
