Don’t sign onto debt service suspension initiative – Gov’t told

Economist with Databank, Courage Kingsley Martey, has asked government not to take advantage of the Debt Service Suspension Initiative (DSSI).

This follows calls by some stakeholders within the financial for government to employ strategies to slow down the rate of the country’s debt accumulation.

According to him, though the initiative is powerful, the move is likely to trigger negative sentiments about the country’s credit story.

Already, total public debt stock at the end of November 2020 rose to GH¢ 286.9 billion representing a year-on-year increase of 33.69% over the total public debt stock recorded at the end of November 2019, adding more pressure on the government to slow down the rate of debt accumulation.

Speaking to Citi Business News, Kingsley Martey, said: “I will not advise government to apply to participate in the DSSI or the Common Framework because it is likely to trigger negative sentiment about Ghana’s credit story. Because typically if you apply for the DSSI or the Common Framework, it is either you are facing liquidity issues with debt service or you’re facing solvency problems as far as repaying the actual debt is concerned. And so, if we choose to apply, that is the signal that we are sending”.

“Also, when we go onto the market to issue new debts especially commercial debt in the form of Eurobond’s, we will not get very good yields. Rather, we will get bonds that are very expensive. I will rather advise government to depend on selling the super credit story that we have, especially, the robust macro-economic framework that we have, as well as the debt management strategy that we have implemented in the last few years and how it has yielded results in reducing the near term refinancing risk on our external debt,” he said.

The Debt Service Suspension Initiative was established by the World Bank.

It is a policy that allows bilateral and multilateral creditors, in a limited period, suspend debt service payments for developing and lower-middle-income countries.

It will also help countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.

Presently, about 30 Sub Saharan African nations including Kenya, Ivory Coast and Ethiopia are on the programme giving them some temporary suspension of debt-service payments owed to their official creditors.