Journey to the Bretton Woods

For the past few weeks phrases like “haircuts” “individual bondholders” “coupon interest”  “maturity period”   etc have taken over the airwaves. It’s all, as we’re told, towards a Domestic Debt Exchange Programme that’s meant to help Ghana secure a deal with the International Monetary Fund (IMF).

 Since independence in 1957, Ghana has made several returns to the IMF and this is supposed to be the 17th time. In other words, Ghana has sought IMF bailout for seventeen times in sixty-six years. The last time Ghana exited the programme was in 2019, barely three years ago. What is especially intriguing about this particular negotiation is the twists and turns on the way to the Bretton Woods institution.

It’s an open secret that Ghana’s fiscal books did not look good enough on their own to secure a good deal from the IMF. But no one could have anticipated this level of suspension and internal turmoil. 

 

The government took a number of steps to “whitewash” the country’s debt sustainability situation to look credit-worthy that failed. In it all few people still imagined their investments would be sacrificed in attempts to secure a bailout. Pensioners and individual bondholders until now,  thought the idea of government tampering with their investments was far-fetched. Indeed, it was widely held that buying government’s bonds and securities were the safest form of investment. 

 

When economic indicators signaled uncertainty, people rushed to buy bonds, safe in the knowledge that their investments were ironclad against any unpredictability. To further cement their faith, the government promised them “no haircuts.” Well, they were in for a rude awakening. 

 

In spite of all the rigorous revenue generation measures the government has put in place, the IMF is still dragging its feet on rolling out a programme for Ghana. With the E-levy, VAT increment, haircuts among other things; will Ghana be able to secure a deal in the nick of time to address the prevailing crisis? 

 

It perhaps comes as no surprise that the president, after urging his colleagues at the US-Africa Summit to refrain from “begging from the West” to develop themselves, called on Germany “encourage” China to support Ghana’s debt restructuring programme. The country is on its last leg and the journey’s end is not in sight. 

 

Truth is, all of these measures are simply unnecessary detours the government is making on its way to the Bretton Woods. To become credit-worthy again, programmes that needlessly drain the public purse such as the National Cathedral, the elephant-sized government and other related things could be looked at again. The stubborn refusal of the government to heed the recommendations of experts will make the journey very unnecessarily tiresome and even worse delay our arrival at the Bretton Woods.