Domestic debt exchange: Government to pursue IMF’s ‘Lending Into Arrears’ policy – Prof. Peprah

Associate Professor of Finance at Andrews University in Michigan, USA, Professor Williams Peprah, says the new terms for the domestic debt exchange programme indicate government’s acceptance to use the International Monetary Fund (IMF) ‘Lending Into Official Arrears’ policy.

‘Lending Into Official Arrears’ policy describes the circumstances in which the IMF extends financial assistance to a member country that is pursuing appropriate policies and making a “good faith” effort to reach a collaborative agreement with its private creditors in a debt restructuring programme.

Speaking to Joy Business he welcomed the government’s decision to extend the deadline for the debt exchange programme to January 6, 2022 as well as modifications of the programme.

According to him, the move will enable the government to achieve its target by getting an IMF support-programme before the end of the first quarter of 2023.

“The new terms on the domestic debt restructuring programme by the government give an indication that the government is now seeking equity whereby it has included individual investors. It also points to the fact that government is open to achieving 80% of principal funds to be in the programmee”.

“Also, we have noticed that government has planned very well to assure that after 2027, each year, there will be some interest payments which is different from the initial proposal. The significant improvement in these new terms is government’s acceptance to use ‘Lending Into Official Arrears’ policy which is also accepted by IMF to address issues when creditors are becoming difficult to accept government terms.”

Professor Peprah said government is going to accrue interest due and pay them later as part of the ‘Lending Into Official Arrears’ policy.

“We could also see that this new proposal has the inputs of all parties after the government listened to the banks, the insurance firms and the trade union associations in the country”, he added.

“I hope that this will settle the discussion and Ghanaians will buy into the debt restructuring process so government can achieve its target by getting the  IMF programme coming in before the end of the first quarter [of 2023]”, he concluded.