Economic reality does not support Akufo-Addo’s ‘no haircuts’ assurance – Economist

An Economist at the University of Ghana Business School (UGBS), Prof. Godfred Bokpin has cast doubt on President Akufo-Addo’s assurance to Ghanaians that government will not engage in any ‘haircut’ as part of debt restructuring.

The President in an address to the nation on the state of the economy on Sunday night assured investors that there will not be any loss of funds resulting from the ongoing negotiations with the IMF.

The President ruled out any possibility of a ‘haircut’ that will see investors losing portions of their funds as part of possible debt restructuring measures which may come up in the ongoing talk with IMF.

“I also want to assure all Ghanaians that no institution or individual including pension funds, government treasury bills or instruments will lose their money as a result of our ongoing IMF negotiations. There will be no ‘haircut’. So I urge all of you to ignore the false rumuors,” he said.

haircut refers to the lower-than-market value placed on an asset being used as collateral for a loan.

But Prof. Bokpin is not convinced by the assurance the President has given.

Speaking on Top Story, Monday, he said the current data and economic challenges point to an imminent debt restructuring because our debts are not sustainable and the country cannot avoid debt restructuring with a possible ‘haircut’.

“The data points to that, the current challenges point to that. Observers and very knowledgeable people in this country have held this view (debt restructuring including haircut) long before Bloomberg came out.

“On one breadth the President said there will be no ‘haircut’ and on another, he said that we are looking at achieving debt sustainability in the next 6 years to about 55% and external debt obligation to about 18%. That is where the President gave himself up.

“So if the framework that the President is working with is for us to achieve debt sustainability by 2028 to about 55% and in terms of the external debt component to about 18%, that is below the policy dependent threshold then the President should just admit that that could not be done without debt restructuring which may entail a ‘haircut’,” he explained.

While Prof. Bokpin believes that ordinarily, he should not doubt the President’s assurance because he may have been furnished with some figures he is unaware of, the Economist argued that the economic reality does not reflect the hope of the government.

He maintained that although the government can conclude staff-level negotiations with the IMF by end of the year, it will not automatically secure a programme for the country unless government is able to prove that its debt is sustainable or engages in some form of debt restructuring.

Meanwhile, Information Minister, Kojo Oppong Nkrumah says the President’s assurance of no ‘haircuts’ with investments in bonds cover just the principals.

According to him, that is the understanding he has on the issue.

“My understanding is that no principals will be touched. No principals (of investment) will have a ‘haircut’,” he said in an interview with Citi FM on Monday.

The Ofoase-Ayirebi MP however, added that when the policy is announced fully, there will be better clarification.

“The debt sustainability strategy is yet to be announced in full.”

“When they are done with the rest of the strategy, and they come out and do a full announcement, we will have clarity on the form that the debt restructuring will take,” he said.


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