An Economist at the University of Ghana Business School (UGBS), says the current form of the debt exchange programme will systematically weaken the balance sheets of participating financial institutions.

Professor Godfred Bokpin, said this is because the approach used by government to formulate its debt operation policy was completely wrong and very lopsided in favour of government interests at the expense of the financial institutions and the general investor community.

According to him, with the International Monetary Fund reaching a staff level agreement with government the burden has now shifted to government to ensure that the staff level agreement reaches the Fund’s executive board.

This will only be achieved if the government is able to get both domestic and foreign investor communities to buy into the debt exchange programme.

However, Prof. Bokpin speaking on JoyNews’ PM Express stated that the general pushback the debt exchange programme has faced suggests that government would have to initiate engagement with key stakeholders and restructure the operation such that the burden is shared evenly between government and investors.

“Because now, this involves trading off money, people’s hard earned money. People traded off consumption over the years in order to invest in government securities because they want to consume more in future. But now what is happening is that people are actually seeing their money actually going.

“Already inflation has reduced it to negative returns; marking to market has already imposed some haircuts on them. So perhaps the question is, should it get worse than this? But that is where we are. A certain level of haircut seems unavoidable, but government should accommodate investors in choosing the style of the haircut that they would want to have.

“That should also not be an imposition. Essentially what I am saying is that some level of discussion, consultation is needed. The debt exchange in its current form will actually weaken systematically the balance sheet of the participating financial institutions,” he said.