Courage Martey, a senior economist with investment firm, Databank, has advised government against taking advantage of the Group of Twenty’s (G20) Debt Service Suspension Initiative (DSSI).
Mr Martey’s assertion follows the view of some analysts that taking advantage of the initiative will provide government some level of fiscal space to better tackle the adverse impacts of the Covid-19 pandemic on businesses, households and the economy at large.
Ghana’s public debt stock at the end of November 2020 rose to Ghs 286.9 billion representing a year-on-year increase of 33.69% over the total public debt stock recorded at the end of November 2019, adding more pressure on government to slow down the rate of debt accumulation.
But speaking to the issue, Mr Martey noted that although the initiative can help provide some form of debt relief for the country, it will send negative sentiments about the country’s credit worthiness to investors.
“I will not advise government to apply to participate in the DSSI or the Common Framework because it is likely to trigger negative sentiment about Ghana’s credit story. Because typically if you apply for the DSSI or the Common Framework, it is either you are facing liquidity issues with debt service or you’re facing solvency problems as far as repaying the actual debt is concerned. And so, if we choose to apply, that is the signal that we are sending,” he said.
“Also, when we go onto the market to issue new debts especially commercial debt in the form of Eurobond’s, we will not get very good yields. Rather, we will get bonds that are very expensive. I will rather advise government to depend on selling the super credit story that we have, especially, the robust macro-economic framework that we have, as well as the debt management strategy that we have implemented in the last few years and how it has yielded results in reducing the near term refinancing risk on our external debt,” he added.
The DSSI is a policy that allows bilateral and multilateral creditors, in a limited period, suspend debt service payments for developing and lower-middle-income countries.
It is also to help countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.
Presently, about 30 Sub Saharan African nations including Kenya, Ivory Coast and Ethiopia are on the programme giving them some temporary suspension of debt-service payments owed to their official creditors.
