Ghanaian-born economist based in the United States, Dr Sa-ad Iddrisu, is cautioning the government and the Finance Ministry of anticipated consequences that can follow their domestic debt restructuring programme if broader consultations are neglected.
Dr Iddrisu made this assertion on Adom TV’s morning show program during a zoom interview on December 10.
“If gov’t fails to engage in broader consultations and get all domestic bondholders willingly involved without any coercion, then Ghana could be facing a looming judgment debt situation. Secondly, if gov’t is not cautious enough with its debt restructuring program, a bank run could be triggered in the coming months,” he said.
Dr Iddrisu also added that the debt exchange program can affect the financial position of some banks in the country, leading to their collapse. “Banks may start facing liquidity challenges and loss of revenue as majority of Ghanaian banks purchase gov’t securities and depend on interest payments from the gov’t. Some banks may completely run out of business, and the possibility of unemployment increase,”
He urged the government to embark on expenditure cuts and fiscal discipline, as the debt restructuring may not be the sole solution to Ghana’s debt problems. “If the government is rigid on its decision to give haircuts to local investors, then she should give herself a haircut too, through cutting back on expenditures such as the office of the President.
Presidential staffers at the Office of the President amount to 995. Factor in all their salaries, allowances, and transportation cost (V8s), and imagine the heavy bill on gov’t. Cut the 995 to 100 – 250 Presidential staffers. Cut back on the Presidential luxury jet rentals. Cut back on ex-gratia payments to the council of state and others and cut back on per-diems at Ministries, agencies and departments”
Dr Iddrisu also questioned the government’s inability to fight corruption by making references to misappropriations and financial irregularities in the Auditor’s General annual reports.
“Tackle corruption seriously by paying attention to the Auditor General’s annual reports, for example, Financial irregularities in the public accounts of ministries, departments and other agencies for the year 2018 was GH¢ 5.2 billion and in 2021, GH¢1.08 billion, Tax irregularities amounted to GH¢989.03 million in 2021 and Cash irregularities amounted to GH¢388.93 million in 2019 and GH¢45.76 million in 2021.”
Dr Iddrisu is of the view that fiscal discipline and the fight against corruption can lead the country faster out of its debt distress than just debt restructuring. To this end, he advised the government to study what happened to Jamaica.
“Jamaica Debt Exchange in 2010. However, in 2013, Jamaica needed a second debt exchange and turned to the IMF again. Meaning, it’s not about Debt Restructuring. It boils down to the fiscal discipline of government,” Dr Iddrisu concluded.
