Ato Forson's solutions on how government can deal with public debt

Dr. Cassiel Ato Forson, has proposed some solutions on how the Nana Addo Dankwa Akufo-Addo-led government can deal with rising public debt. President Akufo-Addo and the Economic Management Team, EMT, have been grappling with an economic crisis nd rising public debt accentuated by the free fall of the Ghana cedi. Describing the government's move as a “Mickey Mouse” approach, Dr. Forson warned that the way and manner government wants to go about the debt restructuring will hurt Ghanaians. “Mr. President, please beware that, a Mickey Mouse form of debt restructuring will hurt Ghana big time. Your debt restructuring must not target domestic creditors. It will destroy us,” he said at an event dubbed "Building the Ghana We Want" on Thursday, October 27. In offering some solutions to the government on how it can deal with what he described as 'Ghana's unsustainable debt' through debt restructuring, the Minority spokesperson on Finance said: "The announcement of debt restructuring will mean that Ghana has defaulted on its debt service obligation and will have to renegotiate. "International credit rating agencies are most likely to downgrade Ghana to D in the coming months as soon as government officially announces debt restructuring. "The process of Debt Restructuring is similar to the HIPC program. However, the HIPC targeted bilateral and multilateral loans, debt restructuring will target commercial loans. "Commercial Lenders and others will have to accept a reduction in interest and principal payment or risk default and non-payment." Dr. Ato Forson continued: "There are three(3) main methods in debt restructuring, namely: Change the maturity date(maturity extension) for amount of Principal or Interest falling due under the affected debts and Introduce Grace Periods. "Reduce the Principal Amounts of the debt, (a Principal Hair-cut) and "Reduce the Interest Rate on the debt for bond indebtedness (coupon adjustment)." He indicated that it is possible to mix and match the three methods above, e.g. maturity extension with a coupon adjustment. "Debt restructuring is not a science but an art and can be tailored to suit particular debt crises such as Ghana’s problem. "Creditors can be expected to express strong views about the method chosen to address the sovereign debt problem. Principal haircuts are unfriendly to creditors and maturity extension and coupon reduction are creditor friendly." Read below Ato Forson's full presentation. PEN/SARA