In his statement, he detailed the following analysing:
Investors get jittery over investments in government treasuries and GoG Eurobonds – Part 1
There are many rumors going around the financial markets that the government of Ghana is contemplating giving all investors in Treasuries and Euro Bonds a haircut, that means that investors will get some pesewas to each Cedi (for GoG Treasury Investors) or cents to each dollar (for Eurobond Investors) of the principal invested i.e they will receive only a fraction of their investments.
Any attempt by government to give investors a haircut on their investment principle will result in government not being able to go to the Capital markets for many many years to come.
This also could be resisted by many investors and there could be lawsuits by investor blocks which could drag Ghana’s current credit crunch; this option is like a road to perdition and only reserved for the non salvageable economies in the world.
So what options does the NPP Govt have??
In the discussions with the IMF, GoG will be required to bring a performance improvement plan (PIP) which should focus on government reducing its expenditure and increase its revenue in the short term for the next two years to stabilize the fiscals, while IMF holds the NPP Govts hand to seek some reprieve from Creditors (local and International) on its debt service.
The first part, reducing expenditure could take the form of the rationalization of employment in the public and civil service (ie reducing staffing and staff costs) and most likely freezing any increases in salaries and freezing employment in non-critical and non-core sectors for a few years, as well as not embarking on any projects or capital expenditure that can wait a few years.
Another area that the NPP Govt will be asked to focus on is in curtailing most of the politically-lead programs/projects which will not lead to any substantial increase the GDP in the short term.
The question the NPP Govt needs to address is if the challenge is a structural one, or if it’s pure mismanagement – where drivers of fundamentals remain strong – as the antidotes to curing both differ.
I see the problem akin to what we had in Black stars a few months ago.
– Do you change the coach or all the players ???
Part 2 will deal with the Challenges Govt faces with Creditors and the debacle Creditors holding GoG securities have.
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