Managing Director of the Ghana Stock Exchange (GSE), Abena Amoah, says the current debt restructuring exercise although painful, presents the country the opportunity to re-set its interest rates regime for the good of the economy.
She said the current rate of about 35 per cent on government securities was unsustainable, adding: “I dare say one of the reasons why we had to restructure our debts was because of the high-interest rates which were not sustainable”.
“Collectively, we must make sure that this era of low-interest rates on government securities will still remain low so that our private sector has a chance of affordable capital to produce for us,” she added.
DDEP
Speaking to the Graphic Business in her first interview since her appointment as the first female Managing Director of the Ghana Stock Exchange (GSE), Ms Amoah said all over the world, government securities attracted lower interest rates and in some advanced economies they even attract negative returns.
That, she explained, was because government securities had never been the basis for investors to receive higher returns and that the private sector was the window through which those with an appetite for higher risk received high returns.
“Ghana’s interest rates on government securities are not sustainable and anyone who builds their lifestyle around government securities cannot sustain it,” she emphasised.
However, she was optimistic that with the current Government of Ghana’s restructured debts, which had seen government interest on the 12 new bonds being traded at single digits, it would mark a new era of low-interest rates regime in the country.
Debt swap
After sustaining a voracious appetite for debt, most of which were pricy, for years, the country last year defaulted in servicing its obligations. It then turned to creditors for amnesty, which culminated in a DDEP that saw about GH¢87 billion of costly and short-dated bonds swapped for low-cost and long-term ones.
A similar exercise is underway with the external debt as part of efforts to meet the requirements for accessing assistance of up to US$3 billion from the International Monetary Fund (IMF).
Treasury bills, which were exempted from the DDEP, are currently trading at a minimum of 35 per cent, a rate the GSE MD said was too costly and a bad benchmark for lending to the private sector.
