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By Francis Ntow\u00a0\u00a0<\/p>\n
Accra, Oct. 01, GNA \u2013 Dr Patrick Asuming, an Economist, has asked Ghanaians not to engage in \u201cunexpected cash withdrawals\u201d (panic withdrawals) as the Government prepares for debt restructuring.\u00a0\u00a0<\/p>\n
He also urged domestic investors to continue to repose confidence in the economy because the International Monetary Fund (IMF) loan support for Ghana\u2019s homegrown economic programme would restore macroeconomic stability to make them thrive.\u00a0\u00a0<\/p>\n
Debt restructuring refers to a situation where someone who owes (in this case, the Government of Ghana) comes to the realisation that it will not be able to pay the debt as originally agreed, therefore, negotiates with the lender for help.\u00a0\u00a0<\/p>\n
In such a situation, the debtor (the Government) negotiates with the lender (financial institutions) to either extend the time of payment or agree to reduce the amount that is supposed to be paid back by the lender (which is referred to as a haircut).\u00a0\u00a0<\/p>\n
Dr Asuming, who is a Senior Lecturer at the University of Ghana, told the Ghana News Agency that the Government would go for domestic debt restructuring as part of the negotiations for an IMF loan support programme.\u00a0\u00a0<\/p>\n
He said the Government would avoid external debt restructuring because it would affect the country\u2019s reputation in the external capital market and its ability to quickly return to the market \u2013 which is currently closed to Ghana.\u00a0<\/p>\n
\u201cWhen you have a treasury, and you want to liquidate before the maturity, you\u2019re going to lose some money. But this should not be a situation where anyone would act in panic and say they\u2019re going to take their money from any financial institution,\u201d Dr Asuming said.\u00a0\u00a0<\/p>\n
\u201cThe Government is really between a rock and hard place, but it\u2019s more likely to have a domestic debt restructuring. The Government has been borrowing a lot and our interest costs have been rising, with Treasury Bills at upwards of 30. Therefore, it\u2019s expensive to pay the debt,\u201d he noted.\u00a0\u00a0<\/p>\n
The Senior Lecturer said the Government would have to negotiate with domestic financial institutions for either an extension to pay its debt or reduce the amount to pay back \u2013 be it the principal or interest payment.\u00a0\u00a0<\/p>\n
He noted that: \u201cWhether the debt restructuring is going to be a delay in payment or reduction, it\u2019s going to affect their (the banks) bottom line \u2013 profit, and hamper domestic investors,\u201d the Economist said, but cautioned against panic withdrawals.\u00a0\u00a0<\/p>\n
He explained that it was important for the Government to put out information to avoid speculations and said: \u201cThe Government must communicate and assure the citizens that people are not going to lose their money.\u201d\u00a0\u00a0<\/p>\n
The Economist said once the implementation of the IMF programme starts, times would be tough in Ghana with citizens having to endure some hardship for about three years.\u00a0\u00a0<\/p>\n
He said: \u201cAn IMF programme would only help us restore macroeconomic stability. We must have a complete reset and change in mentality that we can depend on foreigners to finance our development.\u201d\u00a0\u00a0\u00a0<\/p>\n
\u201cUltimately, we must look to generate more domestic revenue and build a more financially sustainable public finance system that is rooted in a structurally more diverse economy. We must do domestic production,\u201d he encouraged.\u00a0\u00a0\u00a0<\/p>\n
At a press briefing in Accra on Wednesday, Mr Ken Ofori-Atta, the Finance Minister, said the Government was yet to conclude processes for debt restructuring with the IMF.\u00a0\u00a0<\/p>\n
He said, \u201cWe simply have not reached any agreement with the Fund on the parameters of any debt operations as we are in the process of completing the debt sustainability analysis.\u201d\u00a0\u00a0<\/p>\n
The Minister noted that the Government was still working with the IMF Team to update the country\u2019s medium-term macro-fiscal framework to inform the programme\u2019s design.\u00a0\u00a0<\/p>\n
Ghana is negotiating with the IMF for an expected $3 billion loan facility for its homegrown economic programme, which is to help the country navigate through the current economic hardship and improve its fiscal balances sustainably.\u00a0\u00a0<\/p>\n
GNA\u00a0<\/p>\n