DDEP: Seth Terkper speaks against description of interest and principal cuts on bonds as “Government savings”
Former Finance Chief, Seth Terkper, has spoken against the use of the word “Government savings” by some economic analysts and journalists to describe cuts on bondholders’ interest and principal payments by the Government in its domestic debt restructuring programme.
According to the former Finance Chief, what some economic analysts and journalists describe as “Government savings” as a result of the domestic debt restructuring programme is a huge cost to bondholders as it has significantly reduced their investment holdings.
“What is savings? What is referred to as ‘Government savings’ is a cost to people, to bondholders who have their interest and principals cut.”
“By describing it as ‘Government savings’ is it an encouragement for other Governments to also come and do same? No, we should hope to never undertake a re-structuring programme again. So please, let’s be modest in how we describe or call such things,” he stated speaking during a media dialogue on expectations for the 2023 Mid-Year Budget Review on Thursday, July 21, 2023.
Speaking further, Mr Terkper noted that the DDEP has shaken the confidence of investors in the country’s bond markets hence the Government’s over-reliance on treasury bills to finance its expenditure.
“DDEP has really shaken investor confidence in the bond markets and that’s why Government now relies heavily on treasury bills for funds, which by the way is unsustainable for both developing and middle-income countries like Ghana. We need to rebuild confidence in our bond markets,” he noted.
According to economic analysts, Government, through the domestic debt restructuring programme – both Phase 1 and 2 – is estimated to reduce its overall debt burden to bondholders by some GHS 65bn.
The Phase 1 of the DDEP is said to have reduced Government’s debt burden by some GHS 50bn with Phase 2 of the DDEP anticipated to further reduce the debt burden by GHS 15bn.
