IEA’s Kwakye Urges Clarity on Reported GHS77 Billion Debt Write-off by Government and Bank of Ghana

The Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has called for the government and the Bank of Ghana (BoG) to provide clarification regarding the reported write-off of GHS77 billion owed to the central bank. Dr. Kwakye expressed concern that if such a substantial debt has been written off, it could severely impact BoG’s balance sheet and hinder its operations.

Former Finance Minister, Mr. Seth Terkper, also urged Finance Minister Ken Ofori-Atta to disclose additional information on this matter during the upcoming mid-year budget presentation on July 31.

In recent fiscal management between 2022 and the present, the figure of about Ghc37 billion to Ghc38 billion (half of the total GHS77 billion) has played a significant role, prompting interest and questions. Mr. Terkper highlighted that in the Budget Review Report for 2022, ‘arrears’ declined steeply by about Ghc37 billion, but it was not a payment; instead, it was added to the Domestic Public Debt in the IMF Program report.

Ghana’s government reportedly wrote off half of the 77.6 billion cedis ($7 billion) owed to the central bank and replaced the remaining amount with a lower-yielding, 15-year bond, aiming to restructure its domestic debt to qualify for the next tranche of a $3 billion International Monetary Fund (IMF) rescue loan. The government is also seeking negotiations with external creditors as part of this debt restructuring process.

While 85% of eligible holders already exchanged their local currency bonds for new longer-dated bonds with lower interest rates during the first phase of domestic debt restructuring in February, the central bank’s inclusion in the restructuring was met with resistance. However, the IMF insisted on its involvement for Ghana to achieve its debt restructuring targets.

The situation remains a subject of interest and scrutiny, with stakeholders seeking further clarity on the implications and rationale behind the debt write-off and restructuring decisions.