‘Ghana was going to be in trouble; debt restructuring was inevitable’ – Toma Imihere

Financial analyst, Toma Imihere is not shocked at government’s announced debt exchange programme aimed at ensuring sustainability of the Ghana’s public debt.

For him, the current situation was long coming, given the country’s high levels of debt distress.

Ghana is at the doors of the International Monetary Fund (IMF) seeking a $3 billion support program.

The country has also been shut out of the international market due to issues of creditworthiness, forcing the government to go on the route of debt restructuring to bring the monies owed to sustainable levels and meet the lending requirements of the IMF.

“I knew it was going to happen. It was inevitable. It has been inevitable for years in this form. We had been using the wrong measures of our indebtedness by using debt to GDP as against revenue to debt servicing requirements”, Toma Imihere said on the Point of View on Citi TV.

With the proposed debt restructuring beginning 2023, domestic bondholders will have to exchange their instruments for new ones.

Existing domestic bonds as of December 1, 2022, will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% in 2025 until maturity.

Treasury bills and individual bondholders will however not be affected.

Finance Minister, Ken Ofori-Atta has also given assurances that there will be no haircuts on the principal of bonds.

“It was clear that eventually, Ghana will run into trouble because the servicing of the debt was taking too much of our revenues that is why now, we are having to resort to this situation. Especially for the forex aspect of our domestic debt, it was like a pyramid scheme – taking money from foreigners which goes too much into debt servicing. Right from our days of HIPC, we started going to the international market, but we knew we would get to a stage where the market will be closed to us because we were too indebtedness”, Toma Imihere further added.