Pensioners, Domestic Bondholders Lose Out in Debt Sustainability Talks

Pensioners, Domestic Bondholders Lose Out in Debt Sustainability Talks

Ghana's debt restructuring has left pensioners and domestic bondholders bearing the brunt of losses. According to economist Professor Godfred Bokpin, their sacrifices have played a key role in restoring the country's debt sustainability.

Debt Sustainability Talks Yield Unpopular Consequences

Economist Professor Godfred Bopkin says domestic bondholders, Eurobond holders, and pensioners have given Ghana "fresh air" to breathe. "Those who gave Ghana breathing space to have what we have today were domestic bondholders who sacrificed, were Eurobond holders who sacrificed, who came to the table when Ghana needed help the most," he said.

The country's debt-to-GDP ratio and debt-servicing costs have decreased significantly. However, the sacrifices made by these creditors have largely gone unrecognised. "They didn't even get a chance to choose the style of the haircut," Professor Bopkin noted, highlighting the impact on pensioners.

A Lesson from the Past

Ghana has previously experienced a similar fiscal space after the Highly Indebted Poor Countries programme and the Multilateral Debt Relief Initiative. In 2009, the country's debt-to-GDP ratio fell below 30%. However, this fiscal space was eventually dissipated, forcing Ghana to return to the IMF.

Professor Bopkin cautioned that the gains made in debt sustainability could easily be squandered if the country fails to use the fiscal space prudently. "Let's put in place the right structures, spend efficiently, borrow prudently, invest it in enhancing the cash flow-generating capacity of the economy. Otherwise, we have been there before," he said.

Looking Ahead

As Ghana celebrates its improved fiscal position, the country must acknowledge the role of domestic bondholders, Eurobond holders, pensioners, and external bilateral creditors in creating this fiscal space. The government must ensure that the gains made in debt sustainability are not squandered, and that the country uses this fiscal space to invest in its economy and improve the lives of its citizens.

Source: Joy Online