Debt exchange: Economist warns against inclusion of Treasury bills

Economist and Professor of Finance at the University of Ghana Business School, Professor Godfred Bokpin, has stated that the inclusion of Treasury bills in the debt exchange programme will be disastrous to the country’s financial sector.

The government during its announcement of the programme on December 5, 2022, said Treasury bills and individual bondholders will not be affected by the debt exchange programme.

But the government in a December 24 statement announced that individual bondholders will be included in the programme.

It is against this backdrop that Prof. Bokpin is warning against the addition of Treasury bills.

“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,” he is quoted by myjoyonline.

He also added that Ghanaians have lost trust in the government and its promises due to the several U-turns they have made in recent times.

“But the way things are going, it is very difficult to trust the government and their statement, that’s unfortunate. But for now, the government will keep the window open as a way of interacting with the market.

“From the approach, the government has adopted and the terms, by the time we are done, if the 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,” he said.

He further intimated that “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 recapitalized. If you assess the banks’ balance sheet today under IFRS 9, a number of banks will go underwater [collapse].”


SSD/BOG