“Haircuts” in the economy: Akufo-Addo responds to Ato Forson

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On October 30, President Nana Addo Dankwa Akufo-Addo delivered his eagerly awaited speech on the economy, outlining the steps the government was taking to alleviate the financial crisis.

President Nana Addo Dankwa Akufo-Addo


He talked on the need for restructuring, particularly when it comes to domestic debts due to resource constraints. He firmly asserted that any rumors of such plans were untrue.

In fact, the problem of local debt restructuring had gained attention just three days before when Dr. Cassiel Ato Forson, the leading member on finance in Parliament, advocated restructuring models in light of Ghana’s steadily growing unsustainable debt portfolio.

During his presentation at the “The Ghana We Want” lecture, which featured a serious discussion by former president John Dramani Mahama, Ato Forson coined the word “haircuts.”

Ato Forson’s words:

In offering some suggestions for how the Nana Addo Dankwa Akufo-Addo-led administration should cope with the mounting public debt, Dr. Cassiel Ato Forson cautioned that the direction in which the government plans to take the debt restructuring will be detrimental to Ghanaians.

“Mr. President, heed my warning: Ghana will suffer greatly from a Mickey Mouse approach to debt restructuring. You may not single out domestic creditors in your debt restructuring. On October 27th, he said, “It will destroy us.

The Minority spokesperson on Finance provided the government with some suggestions for how to deal with what he called “Ghana’s unsustainable debt” through debt restructuring, including the following:

“Debt restructuring can be accomplished in three (3) ways: Changing the maturity date (maturity extension) for the amount of Principal or Interest owing on the impacted loans; and Adding Grace Periods.

See also  Akufo-Addo's speech on the economy from October 30 in its entirety

“Reduce the debt’s principal by making a principal haircut, and

Reduce the Bond Indebtedness Debt Interest Rate (Coupon Adjustment).

He said it is conceivable to combine the three strategies mentioned above, for example, a maturity extension with a coupon change.

“Financial restructuring can be customized to fit specific debt problems, like Ghana’s issue, and is not a science.

“Creditors are likely to have strong opinions regarding the approach taken to solve the sovereign debt issue. Creditors prefer maturity extension and coupon reduction over principal haircuts, which are unfavorable to them.”

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