Associate Professor of Finance at the University of Ghana Business School, Professor Godfred Bokpin, says the pushback against government’s debt exchange programme is due to the fact that government has failed to internalize its austerity measures.
Describing the debt exchange programme as being too drastic and steep, he stated that government’s failure to do enough on its part has made its request for the financial system instruments to bear the brunt a bit disproportionate.
“I can’t imagine that people sat down and conceptualized something like this and say that we’re going to implement it. This is the NPP that believes in the private sector. This is a country that says that the private sector is the engine of growth. I mean, it’s worrying,” he said on JoyNews’ PM Express.
According to Prof. Bokpin, the prevailing economic situation has become a matter of grave concern, especially for banks, as they are at risk of becoming insolvent due to their eroding capital.
He has projected that banks may have to recapitalize in the next three years to remain robust.
“I’m saying it’s worrying because without even applying debt operation, if you mark to market, government financial instruments in the books of banks today are translating to income losses. For some of them in under basel ii risk based capital prescription they may have to bring additional capital.
“If you look at the exchange rate losses, look, a couple of years ago we said ‘let’s increase the minimum capital requirement to 400million cedis. If you look at that in today’s exchange rate that’s worth very little in dollar terms.
“If you want to make the banking sector robust to support economic growth then we should be looking at the next three years or so recapitalizing banks all over again,” he said.
Meanwhile, he has urged the Financial Stability Council to rather give the 15billion cedis they intend to use to set up a financial stability fund for banks, to the government.
He said, “Why do you want to weaken the balance sheet of banks and later go and set up 15billion to help them? If they could mobilise the 15billion let them give it to government. It is the government’s balance sheet that has deteriorated. Why are we doing this to ourselves? It would have been easier to manage the pain if government had internalized the austerity. Leadership by example.”