Gov’t And BoG Must Clarify Report On GHS77 Billion Debt That Has Been Written Off - IEA’s Kwakye

Dr. John Kwakye, director of research at the Institute of Economic Affairs (IEA), has asked the government and the Bank of Ghana to clarify a report that 77 billion Ghana cedis owed to the central bank have been written off.

Dr. Kwakye indicated that if a debt of this extent is written off, BoG's balance sheet and operations will be severely impaired.

"Government and the Board of Governors must elucidate this report. I cannot comprehend how a debtor could discharge its debt.

"The creditor has the ability. Regardless, if a debt of that magnitude has been written off, it will significantly damage BoG's balance sheet and hinder its operations," he tweeted.

Mr. Seth Terkper, the former minister of finance, also asked Mr. Ken Ofori-Atta, the current minister of finance, for additional information on the mid-year budget, which is scheduled to be delivered on Monday, July 31.

In a series of tweets, Mr. Terkper stated, "The figure or amount of approximately Ghc37 billion to Ghc38 billion [half of BOG Ghc 77 billion] in the narrative appears to be a significant one in recent fiscal management between 2022 and the present. Coincidence? We anticipate next week's MYR for some hints.

"Next, in the Budget Review Report for 2022, 'arrears' decreased significantly by approximately Ghc37 billion." Please note that this was not a payment. According to the IMF Programme Report, approximately US$3.3 billion [approximately GHC36.9 billion ($1=11.2] of "arrears" are added to the Domestic Public Debt.

"ESLA was to resolve a portion of these arrears; some suppliers/contractors received government bonds (at risk). However, it seems reasonable to await the MYR for answers. Then, we will discuss our Tables extracts."

Three sources with direct knowledge of the transaction told Reuters that Ghana's government wrote off half of the 77.6 billion cedis ($7 billion) it owed to the central bank and substituted the remainder with a lower yielding, 15-year bond.

According to Reuters, the latest action is part of the West African nation's effort to restructure its domestic debt, a prerequisite for qualifying for the next installment of an International Monetary Fund (IMF) rescue loan of $3 billion. Ghana wishes to now concentrate on negotiations with external creditors.

The producer of gold, oil, and cocoa concluded the first phase of its domestic debt restructuring in February, when 85 percent of eligible bondholders exchanged their local currency bonds for new longer-term bonds with lower interest rates. This included the 17 billion cedis exchanged by the central bank.

The government is currently restructuring domestic debt totaling 123 billion Ghana cedis, including domestic U.S. dollar bonds, cocoa bills, pension funds, and debt owed to independent power producers and the central bank.

A senior government official stated, "The [central bank] wanted to be excluded and they pushed very hard, but there was no agreement."

"The IMF has also made it clear that we cannot meet our debt restructuring goals if we exclude [central bank debt]."