Doubt Hits President’s “No Haircuts” Assurance
Ghanaians have expressed their keen interest in the government’s decision to protect investors’ investment despite the country’s classification as a high-debt distressed country.
Earlier in October, the World Bank classified Ghana as a high debt distress country following its projection of the country’s debt to Gross Domestic Product (GDP) of 104.6% by the end of 2022.
This triggered concerns about the probability of debt restructuring by the government as the country seeks an International Monetary Fund (IMF) bailout.
But in his address last night, the President of Ghana, Nana Addo Dankwa Akufo-Addo caught not just Ghana but the world by surprise when he said that investors won’t lose a dime of their investment despite plans to reduce total public debt to GDP ratio to 55% in present value terms by 2028.
“To restore and sustain debt sustainability, we plan to reduce our total public debt to GDP ratio to some fifty-five percent (55%) in present value terms by 2028, with the servicing of our external debt pegged at not more than eighteen percent (18%) of our annual revenue also by 2028”, he said.
He added, “I also want to assure all Ghanaians that no individual or institutional investor, including pension funds, in Government treasury bills or instruments will lose their money, as a result of our ongoing IMF negotiations. There will be no “haircuts”, so I urge all of you to ignore the false rumours, just as, in the banking sector clean-up, Government ensured that the 4.6 million depositors affected by the exercise did not lose their deposits”.
In an interview on Citi Breakfast Show, the Information Minister, Kojo Oppong Nkrumah explained that the President’s no “haircut” assurance relates to just principals.
Some Ghanaians doubt this promise will hold.
Describing the statement from the President as a bold one, Broadcast journalist Nana Aba Anamoah said she is intrigued by how this will be attained.
“How do we attain debt sustainability in the short term without a haircut? I’m intrigued by the ‘no haircuts’. It was a bold statement from @NAkufoAddo Meanwhile banks are writing to domestic investors with restructuring options available to them. What is happening?”, she tweeted.
Concern was shed by Cassiel Ato Forson, the Member of Parliament for Ajumako-Enyan-Esiam constituency.
“Mr Prez, How will you be able to bring down the public debt from the UNSUSTAINABLE level of 105% of GDP to 55% of GDP by 2028? At least tell us how you will do this without a haircut on the interest or principal of domestic and foreign Debt? Investors will like to know!”
In a subsequent post, he affirmed that the government will take back its promise.
“Another U-Turn is bound to happen!”, he said after going through the track record of the Akufo-Addo-led government with assurances.
“This same gov’t told us they will not go to IMF and yet it did a U-turn!”
Head of Policy at Debut Justice-a UK charity working to end poverty caused by unjust debt– in the United Kingdom, Tim Jones said cutting debt by 2028 without debt restructuring is “impossible”.
“It is impossible to cut the relative size of external debt payments in half by 2028, without a restructuring. It would require mass public spending cuts and tax increases, that would crash the economy, and ensure the target was not met.”
He added, “President Akufo-Addo’s statement came as part of trying to stop the Cedi falling in value. This has partly been caused by rumours of a restructuring of Cedi denominated debt. But paying $ debt in full does not help with this – in fact it makes the situation worse.”
Source: opemsuo.com/Hajara Fuseini
