Financial Analyst Fears Another Looming Debt Restructuring

Banking Consultant and Financial Analyst, Dr. Richmond Atuahene has said if nothing drastic is done now to make provisions for Ghana’s maturing debts in the future, the country might be forced to follow in the footsteps of Jamaica which undertook another debt restructuring a few years after an initial one.

The analyst says he foresees another debt restructuring in the future since the government is not doing what is necessary to enable the country to pay its debtors when the suspended debts start maturing.

In an interview, he told The High Street Journal that the debt restructuring is just a postponement of the country’s maturing debts to a later date. Ordinarily, the suspension to a later date allows governments to prepare to pay those debts by improving their cash flows.

He stated that several countries use a sinking fund to accumulate funds for debt repayment.

According to the financial analyst, he does not see the current government making any preparations for the debts which will mature in a few years but is fixated on praising themselves for a successful restructuring.

“If you postpone your debts, it means you are making a conscious effort to build your cash flow to be able to pay for your future debts. That is why people call for a sinking fund but the question is how much foreign exchange are we getting to able to allocate some for the sinking fund? Cocoa is nothing to write home about. Gold, last year, gave us US$1.2 billion. This year I’m not certain about it. You should be strategizing in areas where you will be able to generate foreign exchange to service your future debts,” he noted.

It is on account of this that he likened the situation to that of Jamaica, who after embarking on a debt exchange program in 2010 had to undergo another one in 2013 after realising that they could not meet the maturing obligations since adequate provisions were not made.

Dr. Atuahene maintained “My only fear which I can confirm is that, if Ghana does not take very good care, we will behave like Jamaica in 2010, by 2013 they did another debt restructuring. They realised that the cash flows could not meet the debt repayment.”

“Our case looks like more of the Jamaican case. We rushed to do the debt rescheduling and the debt reprofiling but not looking at how are we going to service in the future. When they all start maturing in 2026 and 2027, we are not going to print cedis to pay them. You can’t print cedis. You need a foreign component. But at the moment, I have not seen what we are doing,” he lamented.

He is calling on the government to stop touting a successful debt restructuring exercise and pay attention to how the country can improve its cash flow to be able to service postponed debt when it starts maturing.

Source:thehighstreetjournal.com