Targeting local creditors in a potential debt restructuring, according to Dr. Cassiel Ato Forson, the minority party’s spokesperson on finance, will harm the Ghanaian economy.
As of July 2022, Ghana had GH 402.4 billion in debt.
Dr. Forson estimates that more than GH 200 billion in debt relief is required to make Ghana’s current debt manageable.
The former deputy finance minister warned the administration against using a “mickey mouse” approach to debt restructuring on Thursday, October 27, 2022 at the “Building the Ghana We Want” address at the University of Professional Studies in Accra.
“One of the biggest dilemmas in solving debt restructuring is the extent to which the burden should be borne by holders of the debt instrument governed by domestic and foreign laws and that’s what people call domestic foreign debt restructuring. Restructuring domestic dent is like surgery, you only do it if you must and you avoid it if it might do more harm than good. It is a dangerous tool,” Dr. Ato Forson stated.
He added: Restructuring your domestic debt should be thought through well. Imagine the consequences of haircuts. On the face value of your interest on your bond, imagine waking up one early morning only to be told that your GH¢1 million in government bond has suddenly become GH¢700,000 to the extent that the government has taken GH¢300,000 of your money, imagine that! Pension funds will suffer a drop in value.”
“Tier 2 and Tier 3 pension payout will drop from already low levels. Tier 1 SSNIT reserve will drop in value, SSNIT capacity to pay pensions will certainly suffer, and Insurance companies’ reserves will fall with implication for benefit payment, unfortunately. Local banks, other deposit-taking institutions, savings & loans, and rural banks will all suffer.”