Financial sector to collapse if Gov’t adds T-bills to debt exchange programme – Prof Bokpin
Professor Godfred Bokpin is warning of the collapse of the financial sector if government includes Treasury bills in the debt exchange programme.
He, however, does not expect the government to rope in Treasury bills into the debt exchange programme because that is its only source of borrowing.
Speaking in an interview on Joy FM, Professor Bokpin expressed unhappiness about the inclusion of individual bondholders in the debt exchange programme, describing the move as a wholesale approach.
“If you look at the financing landscape right now, that [T-bills] is the only means government has kept to sustaining itself. So I am not expecting that government will make any announcement of roping in treasury bills.
“What it means is that the regime will collapse because that is the only source of funding apart from the Bank of Ghana sustaining government on its balance sheet.”
“But the way things are going, it is very difficult to trust the government and their statement, that’s unfortunate. But for now, government will keep the window open as a way of interacting with the market”, he stated.
He added that if care is not taken the balance sheet of the banks will weaken after the programme.
“From the approach, government has adopted and the terms, by the time we are done, if government is unwilling to accommodate further revision to the terms of the domestic debt, we will systematically weaken the balance sheet of the participating financial institutions”.
“Without even introducing the debt exchange, if you do mark-to-market, government financial instrument is manifesting explicitly in income losses. And some banks may be asked to bring in additional capital or they will have to be recapitalised. If you assess the banks’ balance sheet today under IFRS 9, a number of banks will go underwater [collapse],” he remarked.
Meanwhile, Government has announced the extension of the deadline date for the submission of existing bonds in exchange for new bonds under the Domestic Debt Exchange Programme (DDEP).
Government, through the Finance Ministry has extended the new deadline date to January 16, 2023 from the previous deadline date of December 30, 2022, with the new settlement date being January 24, 2023.
In addition to extending the deadline, Government has made some amendments to the Domestic Debt Exchange Programme (DDEP) to include eight (8) new debt instruments (bonds) moving the total bonds under the DDEP to 12 bonds with each bond maturing each year from January 2027 to January 2038.
According to the Finance Ministry, its decision to amend terms of the DDEP and extend the deadline date was due to the “consideration of feedback from the financial sector in relation to the need to secure internal approvals.”
“Further, this extension affords the Government of Ghana the opportunity to consider suggestions made by all stakeholders with the aim of adjusting certain measures acceptable within the constraints of the Government’s Debt Sustainability Analysis,” it added.
