Government must adopt other options for debt-related operations - Banking Consultant

An economist and banking consultant, Dr Richmond Atuahene, has cautioned that government’s decision not to adopt other debt-related operations will place the country in a further difficult economic position.

This comes after government on December 5 announced plans to undertake Domestic Debt Exchange programme which will allow bondholders to voluntarily exchange their bonds with fresh bonds.

Reacting to the development in an interview with GhanaWeb Business, Dr Atuahene opined that instead of implementing the DDE only, government can deploy debt rescheduling programme and debt re-profiling programme to ensure the country's rising debts attain sustainable levels.

He however expressed concern that undertaking one debt operation could be counterproductive and could significantly impact the economy negatively.

“There are currently quite a number of options for debt operations model which Ghana could undertake but it seems like government has decided to stick with one that could make things more difficult for us. I believe government could have looked into these options,” he noted.

“For now, government does not want to adopt the word ‘haircut’ but per my calculations, if government undertakes even 5 percent of its Net Percent Value, I strongly think we could get somewhere with our debt programme,” Dr. Atuahene explained.

He continued “…And then if adopt the debt rescheduling and debt re-profiling programmes, it places us in a much better position but if you take only one model and go straight to implement, it could hit the country real hard and that could be disastrous”

Touching on the potential effects of the debt exchange programme on economic output, Dr Atuahene said the exercise could result in high unemployment rates and lower revenue generation streams.

“Nobody thinks about the output, it’s going to have an effect on the output. And it will, in turn, affect revenue generation, because if people are being laid off, production is going to go down, how are you going to get taxes on the profitability and what have you? So, we’re in a very critical situation but I believe it is not too late,” the economist stressed.

The Banking Consultant, thus, called on government to as a matter of urgency conduct extensive engagements with relevant stakeholders, investors and citizens to properly explain the modalities behind the programme.

Meanwhile, a statement issued by the Finance Ministry on December 5 said Ghana is inviting eligible holders to exchange GH¢137.3 billion of the domestic notes and bonds, including Energy Sector Levy Act Plc and Daakye Trust Plc, for a package of New Bonds to be issued.

MA/FNOQ