Financial institutions are not the only ones who will be impacted by Ghana’s debt restructuring; businesses and households will also suffer.
Ghana is in this “reality,” according to the Policy Initiative for Economic Development (PIED), a think tank for economic policy, as it seeks to restructure its debt with the assistance of the International Monetary Fund (IMF).
A Debt Sustainability Analysis (DSI) is now being conducted as Ghana negotiates with the IMF for a $3 billion loan to support its domestic economic program.
By ensuring resilient and inclusive growth, maintaining macroeconomic stability, and advancing social protection, the credit facility aims to lessen the nation’s financial burden.
The government is also setting up a five-member committee of prominent financial services professionals to lead extensive stakeholder engagements across all the key segments of the financial sector in the debt restructuring process.
- Ghana is categorized by the World Bank as a high-debt, distressed country. Debt to GDP will reach 104%.
- Ghana must prioritize restructuring debts owed bilateral partners – Economist
Dr Daniel Abateye Anim-Prempeh, an Economic and Financial Analyst with PIED, told the Ghana News Agency in an interview on Tuesday that financial institutions would be denied the needed access to liquidity through the debt restructuring.
He noted that in effect, banks, pension funds and insurance companies who the government borrowed from would find it difficult to mobilise enough money for onward lending, thereby denying businesses the opportunity to borrow for expansion.
“If businesses are not expanding, it means that they would not be able to increase output. When output is not increased, jobs will not be created, and they cannot make profit and that will also affect the government’s ability to mobilise revenue through taxation,” Dr Anim-Prempeh explained.
Mindful of the reduction in the level of public and investor confidence in the economy and, by extension, the financial sector, he urged the government to ensure that “the debt restructuring is well done and communicated.”
The Financial Analyst said many Ghanaians would resort to the traditional ways of keeping money in their homes should the debt restructuring reduce public confidence, particularly in the financial sector.
“People have invested in treasury bills or bonds with the expectation that when it matures, they can get the money with returns, but now it must now be extended. This means that people’s plan and strategy for the use of that money have been frustrated,” he said. –GNA
