An Economist and Professor of Finance at the University of Ghana, Godfred Bokpin doubts the possibility of Ghana achieving the debt sustainability cut–off of 55% by 2028.

According to him, it is impossible to achieve the target given present value terms.

He explained that even the International Monetary Fund (IMF) ought to know that the country cannot achieve the target given the government’s approach regarding the Domestic Debt Exchange Programme.

The Professor stipulates that the underpinnings of the exchange progamme could be detrimental to the growth of the economy in the long term.

“There is no way Ghana can achieve the debt sustainability cut–off of 55% in present value terms by 2028. It’s impossible – we cannot. Let’s not deceive ourselves. I will not put the blame solely on government. I think the IMF itself ought to contextualize their framework that by 2028, that would be too difficult for us, especially given the approach that government has adopted,” he said.

Prof Bokpin argued that in the wake of the debt exchange programme, individual bondholders could not negotiate from a position of strength due to government keeping a lot of information to itself.

This, he said dwindled the confidence of the participants in the programme.

According to him, government needs to present a “comprehensive picture” as the programme concludes.

Meanwhile, the expert has stressed that rather than resorting to a debt exchange programme, the country would gain debt sustainability faster should government heed calls for fiscal adjustment “heavily built on expenditure cut.”

Explaining further, Prof. Bokpin argued that many of government’s agencies with some created since 2017 have no value to remain in existence. He said they were draining the country financially.

He warns that with such a situation, the success of the debt exchange programme might last a couple of years after which the country would find itself back in crisis.

Background

On October 31, 2022, President Akufo-Addo said the government would implement measures to reduce Ghana’s public debt to Gross Domestic Product (GDP) to 55 per cent by 2028.

In his address on the economy, he indicated that the budget for the 2022 fiscal year was insufficient, thereby affecting the balance of payments and debt sustainability.

Following the update, the Ministry of Finance introduced the debt exchange programme.

However, the programme upon its announcement faced stiff opposition from groups and individuals.

Without the debt exchange programme, the government warned that the nation’s economy would collapse.

Ghana is currently requesting a $3 billion bailout from the IMF to bolster the struggling national economy.

But before the Bretton Woods institution’s board would evaluate Ghana’s request, one of its requirements is the domestic debt restructuring scheme.

A staff-level agreement between Ghana and the IMF was achieved in December, opening the door for the $3 billion rescue.