A Partner and Financial Advisory Leader at Deloitte Ghana, Yaw Appiah Lartey has advised the government to accelerate the negotiation with the International Monetary Fund (IMF).
His comment comes after Fitch Ratings downgraded Ghana’s Long-Term Local- and Foreign-Currency Issuer Default Ratings (IDRs) to ‘CC’, from ‘CCC’.
Fitch Ratings said Ghana’s high level of credit risk following the downgrade to CC reflects the increased likelihood that the country will pursue a debt restructuring as interest costs surge.
Speaking on Morning Starr with Francis Abban Monday, Mr. Lartey indicated that speeding up negotiations with the IMF amidst the worsening economic conditions can bring in some immediate funds to cushion the economy.
In the quest to restructure the country’s debts and rebuild an economy ravaged by mismanagement and COVID-19, Appiah Lartey said “the first thing that Ghana should do is to accelerate the engagement with IMF.”
Citing the Zambia example as it recently secured 1.3 billion dollars from the IMF before its restructuring program, the Financial Advisor noted “So if you have some form of backup or liquidity support from the World Bank or some form of guarantee from the IMF at the time when you start the restructuring, it will be a much easier process. But if you go in a state where you do not have much liquidity when you start negotiating with these credit holders it will be difficult.
He added: “We saw this coming and unfortunately for us the local market is not that vibrant and the idea of the government using loan syndication using the local market or local commercial banks. As we speak the local major banks in Ghana have been downgraded,” Mr. Appiah Lartey stated.
He continued: “What that means is that these banks do not have a lot of liquidity to lend to the government anymore. So our situation has been worse and our public debt is rising and yet the liquidity to service those debts is not there. When you are rated triple C you have some elements of speculation.”
He described the government’s debt status as a junk one that needs some immediate liquidity to save the situation in order to avoid longer debt payments.
“It doesn’t mean that the government will not be able to pay but it will be much more difficult to pay. What that means is that the government will have to restructure to ensure that debts for a shorter or medium period are negotiated for a longer period.”
Source: Ghana/Starrfm.com.gh/103.5FM