T Bills, short-term securities will not be affected by Ghana’s debt restructuring – US-based Associate Professor

 

Treasury bills and short-term securities will not be affected by the expected debt restructuring programme that the Government of Ghana will undertake after the completion of the Debt Sustainability Analysis by the International Monetary Fund and the World Bank.

According to Associate Professor of Finance at Andrews University, Michigan, USA, Dr. Williams Peprah, the focus of the Debt Sustainability Analysis will be on long term bonds or securities.

He added that the International Monetary Fund is likely to swap or take care of Ghana’s Eurobonds due in the next four years as part of the debt restructuring programme. 

A total of $1.673 billion in Eurobonds will be maturing in the next four years.

They include $148.76 million maturing in August 7, 2023 and the $525 million Zero Coupon maturing in 2025.

Also, the $1 billion Eurobond (back-end amortization) which will mature in 2026 will be paid in three equal instalments. $300 million each will be paid to investors in 2024, 2025 and 2026 respectively.

Dr. Peprah told Joy Business the Debt Sustainability Analysis will review thoroughly the country’s Eurobonds, local bonds, debt of State Owned Enterprises, government guarantee-backed debts and arrears.

There is a probability that the IMF will be swapping those Eurobonds due with the $3 billion facility to be given to Ghana to pay them off anytime they are due. This action of IMF will reduce the interest payment on Ghana’s Eurobonds and provide liquidity to support our balance of payment”.

“The conditionality in a way is to provide debt sustainability, and therefore payment in arrears to credit suppliers, statutory payments may be asked to take a ‘haircut’. Then local banks who have funded these credit suppliers by Ghana government will have to impair these loans example road contractors, power providers etc. Then BoG may be asked to give liquidity support to these banks, especially banks that do not have the capitalisation to absorb the losses”.

IMF to compel government to cut expenditures

Dr. Peprah also pointed out that the government will be compelled by the IMF to cut expenditures.

He also mentioned that the Fund support will be used to pay off some of the credit suppliers who may accept the haircut or discount their bills to the government”.

The IMF support will also be used to pay off some of the credit suppliers who may accept the haircut or discount their bills to the government. This will be done with the aim of preventing government to go and borrow to pay them off”.

“Through government’s legal power and with the cooperation, collaboration and consultation with Parliament some payments which are in arrears may be stopped”, he added.

Ghana has $7.3 billion in principal repayments due on outstanding Eurobonds by 2032, according to Moody’s.