Professor of Finance with the University of Ghana Godfred Bokpin says Ghana cannot avoid a debt restructuring.
The increased probability of debt restructuring is one of the drivers of Fitch’s recent downgrade of Ghana’s Long-Term Local and Foreign currency Issuer Default Ratings from ‘CCC’ to ‘CC’.
Despite this development, Prof Godfred Bokpin says the state has no choice but to undertake a restructuring of its debt.
He told Sena Nombo on the Gold Morning Conversation that the IMF program is not a substitute for debt restructuring.
The Finance Professor says without the restructuring of Ghana’s debt, the IMF program would not make a lasting impact.
Even though he admits that debt restructuring would affect the banks and individual investors, Prof Bokpin says the ‘haircuts’ that banks, other institutions and investors would take are necessary to ensure that the current challenges are dealt with.
The debt restructuring means government bond holders would have to agree to lower interest rates and rescheduling of re-payment periods.
Prof Bokpin further indicated that a debt restructuring on the domestic market would affect confidence in the financial sector as it comes on the heels of the financial sector cleanup which led to some depositors and investors losing money.
He called on government to demonstrate austerity by cutting down on the size of government by abolishing deputy CEO positions in state institutions among other initiatives before going to investors to negotiate a restructuring of its debt.