Ghana’s Debt Crisis Could Mirror Greek Scenario: Expert Says “It Will Be A Long And Difficult Road”

• Ghana's debt situation makes the country's economic prospects uncertain, says finance expert Haruna Alhassan
• The CSJ analyst says Ghana's debt crisis could mirror the Greek scenario of 2010 that took close to a decade to fix
• Alhassan says Ghana's road to economic recovery would be long and difficult starting from 2023

Despite the relief that the bailout money from the International Monetary Fund (IMF) would bring to Ghana’s troubled economy, the country’s debt situation remains grim.

Haruna Alhassan, a finance expert with the Centre for Social Justice (CSJ), a Ghanaian think tank, says Ghana’s road to recovery would be a long-drawn-out process and crippling, mirroring that of Greece in 2010.

Alhassan told YEN.com.gh in an exclusive interview that the sovereign debt restructuring and the announced domestic debt exchange, places Ghana’s economy on a tough road starting from 2023.

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“It will be a long and difficult road. The revenue target for 2023 will likely be missed and government will have to cut back significantly on expenditure in order not to widen the fiscal gap.

“This will then constrain GDP growth. We are likely to see further restructuring of government debt. We can easily fall into the Greek debt crisis scenario,” he said.

The Greek Debt Crisis Of 2010

After accumulating dangerous amounts of sovereign debts, Greece admitted it might not be able to pay back money borrowed from the European Union and private investors within stipulated periods. At the time Greece was owing nearly 320 billion Euros.

The Greek debt crisis has been described by some as the biggest financial rescue of a bankrupt country in history. Greece had to loan even more money to pay its debts and by January 2019, the European country had only repaid 41.6 billion Euros. Debt payments have been scheduled beyond 2060.

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Ghana currently owes a total of over GH¢467.4 billion, which is over 100% of GDP. 58%f of this total debt is external with the remainder being domestic debt.

To deal with the situation, Ghana’s finance minister Ken Ofori-Atta approached the the IMF reluctantly for a bailout after vowing not seek help from the Bretton Woods institution because Ghana “is a proud nation.”

Subsequently a debt restructuring to deal with the external debts and a domestic debt exchange programme for local bondholders and lenders were announced.

Although the $3 billion Extended Credit Facility agreement reached with the IMF will be helpful, CSJ analyst thinks the proposed domestic debt exchange will permanently alter pension outcomes significantly.

“The IMF deal depends on the debt exchange. Restructuring of foreign debt is expected to prolong because government has much lower leverage on the foreign creditors compared to local debt holders,” Haruna Alhassan told YEN.com.gh.

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It took Greece close to a decade to normalise its strained economy characterised by deep austerity and contraction in growth, it is uncertain when Ghana will get out of the woods because president Nana Akufo-Addo decides which advice to listen to.

For instance, he has refused to cut down the size of his elephant size government. Economists believe Ghana could make significant savings he did that.

Ofori-Atta: Finance Minister Announces Plans To Swap Cedi Debts for New Bonds In Domestic Debt Exchange Scheme

Meanwhile, YEN.com.gh has reported in a separate story that the finance minister Ken Ofori-Atta announced plans to cut down on the interest payments for local bondholders.

He said in a video posted on the finance ministry's Facebook page that the move is part of plans by the government of Ghana under a Domestic Debt Exchange scheme.

He however explained that treasury bills will not be affected by the debt exchange programme that would enable the government to get $3 billion bailout funds from the IMF.

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Source: YEN.com.gh