Banking consultant and financial analyst Dr. Richmond Atuahene has stated that the government’s partial settlement of its debt to the Social Security and National Insurance Trust (SSNIT) through bonds will have minimal impact on the trust’s current operations.
It would be recalled that the Director-General of SSNIT, Kofi Osafo-Maafo, at a stakeholder meeting in Kumasi last week announced that the government has made substantial progress in settling its debt to the national pension fund.
According to the SSNIT boss, approximately GH₵2.5 billion of its GH₵5 billion arrears have been settled through the issuance of government bonds.
However, Dr. Atuahene is of the belief that the payment by the government has no significance on the current operations of SSNIT.
He told The High Street Journal that given the government’s default in honouring its maturing bonds leading to the debt structuring, the current bonds are not risk-free. In addition, SSNIT cannot resell the bonds at the moment since no trading currently happens on the secondary bonds market making the bonds virtually “worthless.”
At best, Dr. Atuahene said the bonds only improve the solvency of SSNIT but fail to tackle the most important issue of liquidity. He maintained that SSNIT needs cash to be able to meet its monthly obligations but not bonds which only improve its books.
“The first thing that we should realize is that any country that goes into default, as part of international standards cannot re-issue a bond that is risk-free. Anybody who has that bond can do nothing with me. We are talking about liquidity, we are not talking about solvency. SSNIT needs cash to pay the annuities and the pensions. It doesn’t need bonds,” he told The High Street Journal in an interview.
He therefore insisted that bonds do not “help SSNIT in any way. You are only doing this for your balance sheet; solvency but it is not for liquidity. Pensions should be more liquid.”
Dr. Atuahene maintained that there are alternatives to the constant bonds issued by the government which can help it meet its indebtedness.
Among other things, he urged the government to embark on expenditure rationalization to free space for meeting its debt obligations and stop the over-dependence on bonds.
He said, “It is very sad that has found itself in all spheres of the economy. Now it cannot even manage cash flows. It always talks about bonds. And the bonds have led us into a serious economic crisis and we still talk about bonds as if there is no other alternative apart from bonds.
“All that you have to do is to cut your coat according to your clothes. Stop the unnecessary expenditure. Cut it down so that the cash flows will come in to settle the pensions and what have you.”
Source:thehighstreetjournal.com