Ghana’s economy has been battling with severe challenges in the last two years. Inflation hit a 22-year high of 54.1 per cent as at December 2022, with an unsustainable public debt crossing 94 per cent of the country’s gross domestic product (GDP) within the same period.
In July 2022, the government formally approached the International Monetary (IMF) for a fund programme and was able to secure a staff level agreement in December. An Executive Board level approval which would pave the way for the disbursement of the US$3 billion support, was, however, dependent on the country’s ability to restructure both its domestic and external debt.
On December 4, 2022, the government announced the Domestic Debt Restructuring Programme (DDEP) in a bid to restructure domestic bonds of about GH¢137 billion.
The proposed terms then were, however, met with stiff opposition from both individual and institutional bondholders, a development which forced government to withdraw its earlier programme and replace it with 12 new ones.
At the end of the exercise, the DDEP was described as a success with 85 per cent participation, as the government swapped old bonds valued at GH¢83 billion for 12 new ones at reduced coupon rates and longer tenors after further engagements with bondholders.
A year on after the exercise, the Graphic Business adds its voice to calls for the government to institute strong fiscal consolidation measures to back the DDEP.
The country’s public debt which currently stands at 66.4 per cent of GDP is still very high and therefore requires some additional measures to reduce it to the 55 per cent of GDP being projected by the end of the IMF programme in 2026.
The Graphic Business agrees that the DDEP alone was not sufficient to restore debt sustainability and therefore urges the government to resort to fiscal discipline by cutting down on borrowing, controlling expenditure and putting in place measures to boost revenue in a manner that will not overly burden individuals and businesses which are already captured in the tax net.
The paper also strongly believes that lessons must be learnt from the exercise to avoid a repeat of the debt situation which necessitated the need for restructuring.
As the country gets ready for another election, we urge the government to still maintain fiscal discipline and not fall for the pressure to overspend in an election year as such a move would force the government to borrow more, a situation which would defeat the whole purpose of the debt restructuring exercise.
At the moment, the international capital market is closed to the country and post-DDEP, the bond market is basically inactive. This, therefore, leaves the government with just the Treasury Bill (T Bill) market to source for funding.
Considering the short-term nature and high interest rate regime which is characterised with the T Bill market, the Graphic Business urges the government to source for more funding from the multi-lateral lenders such as the World Bank and African Development Bank and reduce its reliance on the T Bill market to finance its operations.
Much as the Breton Woods institutions have downplayed the impact on government’s over-reliance on the domestic market to raise funds, experts point to risks to the economy and that must be taken seriously.
To us, this is the time to be highly innovative and pragmatic in all dealings to ensure that the bitter lessons the country has had to learn would serve as a guide to right the wrongs because within every problem lies an opportunity to turn around for the better.
The paper believes that now more than ever, our destiny lies in our own hands and we still have no option but to look up to our economic managers to elevate us from the present state of near hopelessness and despair to a future filled with confidence.
Source: GraphicOnline
