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Debt restructuring to cause mass layoffs in financial sector - MP

The Member of Parliament for the Ajumako-Enyan-Esiam constituency in the Central Region, Dr. Cassiel Ato Forson has opined that there will be massive layoffs from the financial sector due to the impact of the ongoing debt restructuring.

Dr. Cassiel Ato Forson, MP for Ajumako.

Unemployment will worsen due to the freeze on employment, debt restructuring, poor business climate, and massive austerity,” Dr. Cassiel Ato Forson explained in a post on Facebook.

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According to the ranking member on the Finance Committee of Parliament Ghana’s economy will also record one of the worse non-oil GDP growths due to the impact of the debt restructuring.

The haircut on domestic bonds and Eurobond is expected to adversely impact the health of the banking sector, local businesses, and individuals! Also, Bilateral debt restructuring will lead to government’s foreign financed projects being abandoned,” he mentioned.

The lawmaker further hinted that the cedi will continue to depreciate in the first two quarters of 2023 until the International Monetary Fund (IMF) board approves the support fund for Ghana.

“Inflation is expected to be above 30% for the most part of 2023.

Government’s gold for oil policy will not make any major impact on the price of petroleum products,” he added.

Meanwhile, in a related development, the vice president of IMANI Africa, Bright Simons has expressed concerns about government’s refusal to engage a formal advisory committee representing the bulk of outstanding debt as part of negotiations in the implementation of the Domestic Debt Exchange Programme.

Even though he indicated that the new proposal issued by the Finance Ministry and contained in a Press Statement dated 24th December 2022 was laudable, the amended terms still fall short of the needed collaboration with creditors to guide the process.

The new proposal, whilst showing capacity for flexibility, still falls short of the co-creation demands being made by creditors. It is not clear why the government prefers to engage with creditors without a coordinating mechanism such as a formal advisory committee representing the bulk of outstanding debt. Perhaps it fears that such a process might undermine its negotiation position by removing the “divide and conquer” option. The danger with the attempt to preserve the fragmentation of the creditor community is the likelihood of inertia being traded for lack of organised resistance,” Bright Simons noted in a write-up that identified 7 flaws in Ghana’s Debt Restructuring and how to fix them.

He also argued that the Finance Ministry’s apparent efforts to harden its resolve and try and hold the line without further concessions will have very little influence to deter holdouts.

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