Honorary Vice President of IMANI Africa, Bright Simons says government needs to justify the debt base reduction from 130 billion cedis to 97 billion cedis.

Speaking on JoyNews’ Newsfile on Saturday, he explained that while the government had at the beginning of the debt programme announced that it was trying to restructure 137.2 billion cedis, by 7^th February when the deadline for the programme was coming to an end the figure had been reduced to 130 billion cedis.

However, after the deadline, when participation had been finalized the government announced that the debt to be treated had once again been reduced to 97 billion cedis.

According to Bright Simons, the reduction of debt base needs to be critically interrogated lest the government actually increases debt servicing by almost 18 billion at the end of the debt treatment.

“And it’s surprising that when this matter went to Parliament, parliamentarians did not dwell on this issue – part of the reason the government has given or actually the full reason the government has given for reducing the amount of bonds it wants to treat or it wants to restructure from 130 billion to 97 billion is that first they discovered eventually that some of the debt that they wanted to restructure was not actually valid for this exchange.

“But we only know that only the pension funds were explicitly said not to be valid for the exchange. Everybody else was invited to bring in the old debt and get new debt. So if that was the case and you take the pension funds out, that is around 9 billion or so, we’re still left with way more than 128 billion or something like that, not 97.

“So the government then comes up with a second reason which is that some of the bonds have now changed to treasury bills. But if that is the case we need to be told the terms. It can’t be that almost 40 billion have all been changed to Treasury bills because our current Treasury bill volume is about 57 billion. If we add that to it that will mean our Treasury bills is almost now a 100 billion. So it must be a very small proportion of it or at the very least it’s not this majority,” he said.

He explained that taking into consideration how expensive Treasury bills are and the shorter duration they have to be serviced, this might mean that the government has increased its cost of borrowing by almost 30 billion.

“Secondly the treasury bills are more expensive because they have shorter duration and they have higher interest rate. So if we’ve done it in this way and the current rate of Treasury bill is what is being applied then ultimately, what we have now is a situation where we’ve increased the cost of borrowing for the government by almost 30 billion.

“So somebody has to explain very critically to us how much of bonds have been converted to treasury bills, and for whom? For which reason? What was the interest rate for the new treasury bills? And what is the duration? Because that will tell us that if we don’t calculate properly by the time the government ended the debt restructuring it actually increased its debt burden not saved.

“Because if it’s true by pure calculation that we have changed 40 billion of bonds into treasury bills, reduced the average tenure from 3 and half years to one year, a treasury bill must be under one year and increase the average interest rate from our 19% to 35% because that is the average interest rate today then the new cost to the government is over 30 million.

“So the savings that the government has made in this scheme which is around 12 billion or less is actually less. By the time we conclude the transaction we actually have increased government debt servicing by almost 18 billion, that’s very dangerous,” he said.