Confidence in gov’t securities should not be undermined by debt restructuring – Ken Thompson
Chief Executive 0fficer of Dalex Finance, Ken Thompson, has said any debt restructuring that government plans to undertake must be done in a way that will not undermine the confidence in investment in government securities.
Speaking in an interview on the PM Express Business Edition, Mr Thompson said, “At the moment, if you touch local bonds or local government papers it will have serious implications for the entire domestic treasury market and the economy.”
Advising the government, Mr. Thompson pushed for aggressive measures to deal with Ghana’s low revenue levels which he believes may go a long way to deal with current financial challenges facing the economy.
“Ghana has gotten into this situation because, we have spent far more than what the country is mobilizing in revenue”.
Some corporate finance books and papers have defined debt restructuring as a process where a firm or an entity is experiencing some liquidity or financial challenges in refinancing its existing debt obligations in order to gain more flexibility in the short term and make their debt more manageable.
Debt restructuring usually involves direct negotiations between a company and its creditors.
The restructuring can be initiated by the company or, in some cases, be enforced by its creditors.
The IMF recently disclosed that Ghana can only carry out its debt restructuring programme after the World Bank and IMF complete its assessment on Ghana’s debt situation through the “Debt Sustainability Report”.
This was after the IMF asked Government to present a proposal on how it intends to restructure the country’s rising debt stock.
Some financial observers have warned that debt restructuring may come with some shocks for the economy going forward.
Sources close to Government have maintained that government is yet to take a decision on the approach and the areas that will be affected by the restructuring exercise.
“We are waiting for the outcome of the IMF/World Bank Debt Sustainability analysis report, which will influence how the restructuring will be done for Ghana”, a source said.
