Economist, Professor Godfred Bokpin, has berated the government for not sticking to its side of the bargain to adjust fiscal expenditure amidst the country’s debt sustainability crisis, for which reason creditors have taken a haircut to save the situation.
Speaking in an interview, following the government’s decision to reopen the Domestic Debt Exchange Programme (DDEP), Prof. Bokpin said the government was too quick to declare the first programme a success, considering the gap that had to be closed from the debt sustainability analysis.
“You remember on this same programme, we said that the government was celebrating success that wasn’t really success. It was pretty clear to us that government didn’t get exactly what it wanted.”
“You know, the government is still spending as though there’s no crisis. Government is living a lifestyle that suggests that it is harvest time. If you look at our approach towards our elections and all of that, it tells you that this approach of royals versus subjects, subjects being creditors, and can be treated anyhow and all of that, I think it’s not good for nation building. It’s not good for building your own financial markets” he noted.
In response to complaints by bondholders who said they were not consulted regarding the DDEP reopening, Prof. Bokpin said, “If you look at the approach government is adopting, there is less value actually placed on consultation and recognizing creditors as important stakeholders in all of this, and therefore it didn’t matter much if government didn’t even consult those people before coming up with this reopening when they had been exempted and all of that.”
The economist said he expected the government to be more committed to ending this process to bring relief to creditors.
“One would have thought that after such a painful process, we would be moving quite quickly to bring a closure to this whole domestic debt exchange so that the country can build forward better and inclusively, because, you need to generate trust in your financial system and so it’s a bit concerning the way we are going.”
Prof. Bokpin is particularly concerned that the focus out of the crisis seems to be more on the DDEP.
He said if all the creditors had come together with one voice, the government would have conducted itself better under the programme.
“If you look at the fiscal framework, you will see that there is considerable room to make expenditure-based fiscal adjustments that will lessen the burden on creditors. The narrative has been that debt restructuring seems to be the only way out of this. And that is why I am saying that, from the beginning, if domestic creditors had come together in a more organized way and negotiated from a position of strength, there would have been clarity in terms scope of adjustment from fiscal, debt restructuring and all of that so that it is clear to all of us.”
The government on Wednesday re-opened its invitation for the DDEP in relation to the February 2023 Exchange to enable holders of domestic bonds and notes who could not take part in the exercise to do so.
A statement issued by the Finance Ministry said the government was inviting holders of the domestic notes and bonds of the Republic of Ghana, E.S.L.A. Plc and Daakye Trust Plc, to tender their holdings of the eligible bonds in exchange for a package of new tranches.
The Finance Ministry said the invitation was available only to registered holders of eligible bonds that were not Pension Funds.
It noted that the new bonds (which will include the new tranches) are expected to be more liquid than the eligible bonds, considering the larger investment base and the benchmark size of the new bonds.
In addition, the government said it could under certain circumstances prioritize payments on the new bonds over payments on the eligible bonds. It said participation in this administrative reopening would also further improve the cash flow position of the government and further support debt sustainability.
The government last year, as part of the $3-billion three year Extended Credit Facility Programme with the International Monetary Fund (IMF), embarked on a DDEP programme as part of measures to ensure debt sustainability and restore macroeconomic stability.
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