Prof Gatsi dismisses notion that T-Bills can’t be restructured
Dean of the Business School at the University of Cape Coast (UCC), Professor John Gatsi, has dismissed the wide-held belief that treasury bills cannot be restructured by the Government.
According to him, treasury bills are potentially restructurable if the Government gets to the point where it is unable to repay investors of the short-term debt instrument.
Speaking to NorvanReports’ Fuaad Dodoo in a sit-down interview following his inaugural lecture on Islamic Banking in Ghana on Thursday, Prof Gatsi averred the belief that T-Bills cannot be restructured is wrong.
“T-Bills is short-term borrowing, and so long as the one who borrows gets to the point where he cannot pay, it is potentially restructurable.
“So long as the Government keeps taking money, if it gets to a point that it cannot service those debts, it will come back to the market and plead with the people.
“And Government can get to that point, there is nothing like Government cannot get to that point. When Government gets to that point and it cannot pay, it will definitely come to the people for help.
“So it’s not like as for T-Bills it cannot be restructured, no, that concept is wrong and that is why Government has to be circumspect the way it is heavily involved in the T-Bills market raising money to finance long term activities,” he pointed out.
The International Monetary Fund (IMF) last year disclosed a mounting consensus to exclude short-term debt from the purview of debt restructuring, significantly sparing Treasury bills from the impact of such measures even as interest rates continue to rise.
During the Global Sovereign Debt Roundtable held last year at the Spring Meetings in Morocco, the IMF emphasized that this practice is not a novel one, as it aligns with established procedures within the Paris Club and is explicitly enshrined in the Common Framework, a framework designed to address sovereign debt challenges.
This shift in approach holds paramount importance for countries like Ghana navigating the challenging terrain of debt restructuring, as it plays a pivotal role in safeguarding their access to essential trade finance. This, in turn, bolsters their capacity to engage in international commerce and trade, mitigating potential disruptions that may arise from financial upheaval.
The IMF has underscored the growing prevalence of this approach, both within and outside the Common Framework, pointing to recent instances where short-term debt has been systematically excluded from the restructuring process.
This shift signals a collective recognition of the value in preserving short-term financial stability, particularly in an environment characterized by fluctuations in interest rates.
