Debt restructuring comments: Don’t run ahead to spread fear and panic – Otchere-Darko

A leading member of the New Patriotic Party (NPP) Gabby Otchere-Darko has appealed to persons in the country to exercise restraints in their commentaries on possible debt restructuring in Ghana following the ongoing negotiations with the International Monetary Fund (IMF).

But Mr Otchere-Darko explained that negotiations on the best pill for Ghana’s ailing debt situation are only about to begin with the Fund hence there is no need to create fear and panic.

Some analysts believe that Ghana will go through debt restructuring, a situation they indicate will impact the financial sector negatively.

But the former Executive Director of the Danquah Institute tweeted “These are very sensitive times and negotiations on the best pill for Ghana’s ailing debt situation are only about to begin! It is important that the media and their commentators do not run ahead of themselves to become the purveyors of fear and panic.”

His comments come after the IMF has said it is too early to start talking about debt restructuring in Ghana following the ongoing negotiation to get a programme for the West African country.

The Fund says restructuring of Ghana’s debt will hinge on the outcome of its Debt Sustainability Analysis (DSA) Report.

The IMF Director of Communications, Gerry Rice who disclosed this at a News Conference in Washington DC intimated the DSA report will indicate if there is the need for debt restructuring in the first place and if necessary, how it should be carried out as well as which areas will be affected.

“When a country requests financing from the IMF, we assess whether the country’s policies are consistent with debt sustainability as one of our requirements. We still need to conduct a thorough update of the debt situation in Ghana through our Debt Sustainability Analysis.

“The last, I don’t know if it’s useful, I have here the last DSA, Debt Sustainability Analysis. We published this as part of the 2021 Article IV Staff Report with Ghana. It said public debt was a sustainable conditional on a rigorous and credible implementation of the authority’s medium term consolidation plan to put debt on a declining trajectory and ensure continued market access,” Mr. Rice stressed.

A Former Finance Minister Mr Seth Terkper had indicated that debt restructuring in Ghana was unavoidable given the spending that have been engaged in by the government over the period.

Ghana has commenced discussions with domestic bondholders on a restructuring of its local-currency or cedi debt as part of plan to secure a $3 billion loan from the International Monetary Fund.

Bloomberg reported that the nation’s largest debt investors including local banks and pension funds are preparing to engage in discussion on debt reorganization that could entail extension of maturities and haircuts on principal and interest payments, according to people familiar with the matter, who asked not to be identified because they are not authorized to speak publicly.

The restructuring would be part of a debt-sustainability plan required by the IMF and will include part of the $19 billion Ghana has in outstanding local debt.

Speaking on the Ghana Tonight show on TV3 with Alfred Ocansey, Monday September 26, Mr Terkper said “Debt restructuring at this point is inevitable because if you are having difficulties paying your bills …you have to be smart with your borrowing otherwise, the debts keep increasing. The alarming part of it which we have not highlighted very much is the intervention of Bank of Ghana.

“Remember we moved from Zero financing in 2016 to Bank of Ghana coming to the aide of government, gradually and reaching a peak of 10billion Cedis which is 1.7bn US dollars more than the Covid loan that we took and the World Bank and other injections.”

The Ministry of Finance and the Bank of Ghana have commenced discussions with the IMF for an IMF-supported programme.

A key prerequisite for a programme is confirmation that Ghana’s debt is on a sustainable path.

This will require a comprehensive Debt Sustainability Analysis (DSA), which is currently ongoing.

A statement issued by the Finance Ministry on Monday September 26 said the Government of Ghana is putting together a comprehensive post Covid-19 economic programme which will form the basis for the IMF negotiations.

“The programme seeks to establish a macro-fiscal path that ensures debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection.

“Government negotiations with respect to the IMF-supported programme is commencing this week and we are optimistic about making progress in our discussions.

“Government remains committed, and shall continue to actively engage all stakeholders, both public and private, in a clear and transparent manner as we seek to fast-track this process.”


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