Debt restructuring should not undermine confidence in gov’t securities -Ken Thompson

The Chief Executive of Delax Financial Services, Ken Thompson has maintained that any debt restructuring that government plans to undertake must be done in a way that will not undermine confidence in investment in government securities.

“At the moment, if you touch local bonds or local government papers it will have serious implications for the entire domestic treasury market and the economy”, he said.

Mr. Thompson was speaking on PM Express Business Edition with host, George Wiafe on 22 September 2022 on the Joy News channel.

Advising government, Mr. Thompson pushed for aggressive measures to deal with Ghana’s low revenue levels which he believes may go a long way to deal with current financial challenges facing the economy.

“Ghana has gotten into this situation because, we have spent far more than what the country is mobilizing in revenue”.

He noted that businesses are willing to support the economy with the necessary taxes to improve the revenue situation going forward.

The Debt Restructuring Challenge

Some corporate finance books and papers have defined debt restructuring as a process where a firm or an entity is experiencing some liquidity or financial challenges in refinancing its existing debt obligations in order to gain more flexibility in the short term and make their debt more manageable.

Debt restructuring usually involves direct negotiations between a company and its creditors.

The restructuring can be initiated by the company or, in some cases, be enforced by its creditors.

The IMF recently disclosed that Ghana can only carry out its debt restructuring programme after the World Bank and IMF complete its assessment on Ghana’s debt situation through the “Debt Sustainability Report”.

This was after the IMF asked Government to present a proposal on how it intends to restructure the country’s rising debt stock.

Some financial observers have warned that debt restructuring may come with some shocks for the economy going forward.

Government and the debt restructuring challenge

Sources close to Government have maintained that government is yet to take a decision on the approach and the areas that will be affected by the restructuring exercise.

“We are waiting for the outcome of the IMF/World Bank Debt Sustainability analysis report, which will influence how the restructuring will be done for Ghana”, a source said.

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