The Group of Twenty (G20) in the wake of the ravaging Covid-19 pandemic in April this year launched the Debt Service Suspension Initiative (DSSI).
The launching of the DSSI meant the suspension of debt service payments in excess of $11.5 billion by the world’s poorest and developing economies.
The DSSI according to the G20 is aimed at providing additional resources for the world’s poorest and developing countries to mitigate the adverse impacts of pandemic.
Given the high level of interest payments made by the country – Ghana is expected to pay Ghs 24 billion in interest payments for 2020 alone – it was expected that Government will take advantage of the DSSI and have most if not all of its debt suspended to be able to fully concentrate on providing stimulus packages for faster economic recovery, but that was not to be.
Speaking on the reason why the country did not capitalize on the initiative at the 97th Monetary Policy Committee (MPC) press briefing, Governor of the Central Bank, Dr Ernest Addison averred doing so would have sent wrong signals to investors about Ghana’s ability to service it’s debts.
“Ghana did not roll on to the DSSI because it has implications for credit worthiness, the moment you go onto the programme you cloud perceptions about yourself to investors on your ability to service your debts and the country’s decision to stay away from it has been helpful. Especially given the fact that we will be going back to the capital market next year,” he stated.
A similar view is shared by the Deputy Governor of the Central Bank, Dr Maxwell Opoku-Afari, who during a webinar last September, noted the DSSI will adversely impact market access countries – countries with access to international capital markets – as it may send wrong signals about the country’s credit worthiness leading to potential loss of market access in the medium to long term.
Dr Opoku-Afari in the webinar noted that restrictive conditionalities associated with the DSSI may hurt countries accessing the DSSI since they will have to comply with the IMF/World Bank ceilings on non-concessional borrowing.
He pointed out one of the channels the international community can support fiscal sustainability in low-income economies and developing countries like Ghana.
“Finally, perhaps crucially, it is important for these economies to be supported to strengthen and implement reforms aimed at dismantling bottlenecks
in domestic revenue mobilization and administration, define a feasible fiscal adjustment plan to stabilise debt in the medium term. Support transparency in debt statistics, ensure sustainable lending and borrowing and improve the capacity of domestic financial institutions to support domestic productive capacity,” he noted.
Ghana’s debt-to-GDP currently stands at 71 per cent, surpassing the debt sustainability benchmark for countries.
Ghana’s debt stock is however expected to further worsen, as the nation’s debt to GDP is projected to reach 76.7 per cent by the end of 2020.