Ghana: Government reorganises domestic debt in the wake of the country’s worst economic crisis.
Ghana, a former African Empire, is facing its worst economic crisis in decades. Inflation in the country is over 40% and the national currency has lost more than half its value. In an attempt to stem the tide and avoid default, domestic debt restructuring measures took effect earlier this week in December 2022. Ghana’s Finance Minister, Ken Ofori-Atta, announced the creation of a new series of bonds to replace maturing securities in an attempt to deal with the economic crisis.
Governments issue bonds to cover financing needs in Ghana. Normally, sovereign bonds are considered safe investments.
So the purpose of these bonds is to quickly stabilise the troubled Ghanaian economy, » says Mr Ofori-Atta. « Our commitment to Ghanaians and the investment community, in line with the ongoing negotiations with the IMF, is to restore macroeconomic stability as soon as possible and allow investors to realise the benefits of this debt restructuring, » he explained, indicating that the Ghanaian government « has worked hard to minimise the impact on investors holding sovereign bonds.
Indeed, Ghana is seeking a $3 billion credit facility to deal with record inflation of 37% and the collapse of its currency (the cedi). Speaking on Sunday, December 4, 2022, the Finance Minister said banks and financial institutions recognised by the government were holding much of the local government debt, but that regulators and the central bank would help mitigate the impact on the latter.
« Today’s announcement is a major policy measure that the government is taking in the short term to restore macroeconomic stability, ensure debt sustainability and get the economy back on track to create and protect jobs, provide and improve incomes, foster strong and inclusive export-led growth and restore hope to the Ghanaian people, » he said.
Ghana is a major producer of cocoa and gold and has oil and gas reserves, but debt repayment is absorbing its revenues, with over 70% of its tax revenues dedicated to debt repayment, putting pressure on public spending.
In the coming days, this external debt restructuring plan will be presented. According to Kenneth Ofori-Atta, the economy should stabilise next year and inflation return to single digits thanks to the debt restructuring plan and the IMF (International Monetary Fund) loan.
Miss OLY
