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Govt still operating under the assumption that there is no crisis – Prof. Bokpin on reopened DDEP

Economist Professor Godfred Bokpin criticized the government for failing to uphold its commitment to adjust fiscal expenditure during the nation’s debt sustainability crisis, which has led creditors to accept a reduction in their claims to address the situation.

Speaking on JoyNews’ PM Express on Monday, Professor Bokpin expressed his concerns regarding the government’s hasty declaration of the initial program’s success, especially in light of the substantial gap that needed to be addressed according to debt sustainability analysis.

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“You remember on this same programme, we said that the government was celebrating success that wasn’t really success. It was pretty clear to us that government didn’t get exactly what it wanted.”

“You know, the government is still spending as though there’s no crisis. Government is living a lifestyle that suggests that it is harvest time. If you look at our approach towards our elections and all of that, it tells you that this approach of royals versus subjects, subjects being creditors, and can be treated anyhow and all of that, I think it’s not good for nation building. It’s not good for building your own financial markets” he noted.

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In response to complaints by bondholders who said they were not consulted regarding the DDEP reopening, Prof. Bokpin said, “If you look at the approach government is adopting, there is less value actually placed on consultation and recognizing creditors as important stakeholders in all of this, and therefore it didn’t matter much if government didn’t even consult those people before coming up with this reopening when they had been exempted and all of that.”

The economist claimed that in order to relieve creditors, he anticipated a stronger commitment from the government to put an end to this procedure.

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“One would have thought that after such a painful process, we would be moving quite quickly to bring a closure to this whole domestic debt exchange so that the country can build forward better and inclusively, because, you need to generate trust in your financial system and so it’s a bit concerning the way we are going.”

Prof. Bokpin is especially concerned that the DDEP appears to be receiving more attention since the crisis.

He claimed that the government would have behaved better under the scheme if all of the creditors had spoken with a single voice.

“If you look at the fiscal framework, you will see that there is considerable room to make expenditure-based fiscal adjustments that will lessen the burden on creditors. The narrative has been that debt restructuring seems to be the only way out of this. And that is why I am saying that, from the beginning, if domestic creditors had come together in a more organized way and negotiated from a position of strength, there would have been clarity in terms scope of adjustment from fiscal, debt restructuring and all of that so that it is clear to all of us.”

In order to allow holders of domestic bonds and notes who were unable to participate in the exercise to do so, the government reopened its invitation for the DDEP in respect to the February 2023 Exchange on Wednesday.

According to a statement from the Finance Ministry, the government is encouraging E.S.L.A. Plc and Daakye Trust Plc, holders of domestic notes and bonds of the Republic of Ghana, to tender their holdings of the eligible bonds in return for a bundle of fresh tranches.

Only registered owners of eligible bonds that are not Pension Funds are eligible for the invitation, according to the Finance Ministry.

The government highlighted that the upcoming bonds, including the new tranches, are expected to exhibit greater liquidity compared to the eligible bonds, thanks to their larger investment base and benchmark size.

Furthermore, the government indicated that under specific circumstances, it may prioritize payments on the new bonds over payments on the eligible bonds. It emphasized that participating in this administrative reopening would enhance the government’s cash flow position and provide additional support for debt sustainability.

It is worth noting that last year, as part of the $3-billion three-year Extended Credit Facility Programme in collaboration with the International Monetary Fund (IMF), the government initiated the Domestic Debt Exchange Programme (DDEP) as one of the measures aimed at ensuring debt sustainability and restoring macroeconomic stability.

“I see that she doesn’t respect the party, and one thing I see is that her upbringing is also part because she didn’t go to school to see classmates and have classmates, she had home tuition

“…so I will plead with the party to accept the apology but they shouldn’t allow her to venture into Parliament or as a Minister again, she should go and sit elsewhere and find another alternative,” he said in a panel discussion on Pure FM on September 18, 2023.

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