We may never get official reasons for the Akufo-Addo government’s failure to apply for the Debt Service Suspension Initiative (DSSI) administered by the World Bank and the IMF between 2020 and 2021.
The World Bank President was recently reported to have said that, “Ghana should have signed up for Debt Service Suspension Initiative (DSSI)”.
As an individual who advocated in March 2021 for Ghana to even go for a 2-year debt service suspension as part of a package to change the country over 24 months, I feel angry that government ignored this initiative that could, together with other measures, have saved the economy and the free-falling cedi.
So, why did government not take advantage of the DSSI?
Two basic reasons
We may never get official reasons for government’s reckless decision to not apply for the DSSI or approach the IMF earlier than it did. But, as a political and economic analyst, I have two basic reasons to explain why we are where we are:
- Debt Sustainability Analysis (DSA)
Government did not want to be exposed to be in a situation of debt unsustainability and would have had to institute policies aimed at debt sustainability, denying them of the reckless borrowing and spending that they had become accustomed to. Applying for the DSSI would have forced government to undertake a DSA that would include the financial sector clean-up costs and the energy sector legacy debts to government debts, and thereby show overall government debt level as unsustainable. With that, government would have been compelled to implement policies/measures to bring our debt to sustainable levels over a period, something this government was not willing to implement, given their addiction to Eurobonds. Sadly, they are going to do the very DSA and implement the very policies they didn’t want to do to save the economy and the Cedi, now doing so under circumstances of a failing economy and a free-falling Cedi. They could have done it when they had control of the situation.
Having ridiculed President Mahama and his government for going to the IMF in 2015, this government did not want to have anything to do with the IMF and the World Bank. Ken Ofori-Atta, even when the signs were on the wall that going to the IMF was inevitable, was saying that Ghana was a proud country that would not go to the IMF. The pride and arrogance of government made them not apply for the DSSI, when it was clear Ghana was going to suffer big time for not doing so.