Domestic debt exchange: 'Fiscal recklessness cause of crisis' - Expert

Dr. George Domfeh, a Senior Research Fellow at the Centre for Social Policy Studies at the University of Ghana, says the current domestic debt exchange crises are a result of fiscal recklessness.

This statement by the expert is in line with the debate about possible haircuts on all bonds and treasury bills following government’s debt restructuring deal with the International Monetary Fund (IMF),

In a public address on the recent debate about possible haircuts on all bonds and treasury bills following government’s debt restructuring deal with the International Monetary Fund (IMF), Mr. Ofori-Atta said government will ensure that people’s investments are safe.

“Treasury Bills are completely exempted, and all holders will be paid the full value of their investments on maturity. There will be no haircut on the principal of bonds. Individual holders of bonds will not be affected,” Ofori-Atta said in an address on Sunday evening.

The Finance Minister noted that government has concluded the broad contours of the debt sustainability analysis and details on Ghana’s domestic debt exchange which was launched on Monday, December 5, 2022.

He, however, said the external debt restructuring parameters would be presented in due course.

He said the government recognizes that Ghana’s financial institutions hold a substantial proportion of these bonds, “as such, the potential impact of this exchange on the financial sector has been assessed by their respective regulators. Working together, these regulators have put in place appropriate measures and safeguards to minimize the potential impact on the financial sector and to ensure that financial stability is preserved.

Speaking on the issue on Atinka FM’s AM Drive with host Kaakyire Ofori Ayim, Dr. George Domfeh explained that a country’s fiscal recklessness is the difference between its revenue and its expenditure.

He added that over the past years, the expenditure of successive governments have always outweighed the revenues, which cannot be attributed to the current New Patriotic Party (NPP) government.   

He revealed that Ghana recorded a positive primary balance for the first time in fifteen years in 2017.

“We all know what happened in 2020, Covid-19 swallowed a chunk of our revenue. We are not in normal times and our expenditure is more than our revenue. That is the situation we are in now. We need to look at it and find a lasting solution rather than apportioning blames,” George Domfeh added.