Government should have prioritized fiscal discipline to debt restructuring-Prof. Bopkin

Rather than making debt restructuring the magic wand, an Economist and Professor of Finance at the University of Ghana Business School(UGBS), Professor Godfred A. Bopkin contested that the government should have considered fiscal discipline.

Much as he believes the road to debt sustainability encompasses debt restructuring, he does not think it should be the final option for the country. Professor Bopkin was speaking at an organized by the Economic Governance Platform(EGP) to brood over alternatives to the debt exchange path the country has chosen.

The public forum on Ghana's Debt Exchange Program was themed:Ghana's Debt Exchange Program:Is it a make or break for an IMF bailout or there are visible alternatives? Professor Bopkin strongly believes that a disciplined fiscal regime should have been chosen over the debt exchange. According to him, with fiscal discipline, if the government shows commitment by reducing the size of ministers and other regional and departmental heads, the wage bill would trickle down and that would have significantly helped to raise enough funds.

He further said that the approach shows much commitment so only serious African countries would see it as an option. "Typically, when you are in economic crisis, called debt-induced macroeconomic instability which is mainly blamed on fiscal then you will expect that the cause or source also contribute a fair share to the solution. So because the problem is largely fiscal, we are talking about fiscal consolidation.

If you look at the magnitude of the problem, then the triangle approach which talks about the road to debt sustainability involving fiscal adjustment, structural adjustment, and debt restructuring, you are looking at a fair adjustment that does not load the burden on one leg, then you are looking at equitable triangle", he said. Sadly, he disclosed that Ghana has breached the sustainable debt analysis for International Monetary Fund(IMF) support program which reason the government chose debt restructuring.

Professor Bopkin explained further that an ambitious debt repayment capacity based on a sustained front-loaded fiscal adjustment bearing in mind the next political business cycle which he said is two years down the line adding, " Fiscal adjustment at 0.7 versus an average of 12% is less ambitious hence investor haircuts". Professor Bopkin bemoaned the failure of the recent IMF Supported Programs to deal with the political business cycle which was characterized by what he termed as "highly monetized democracy with our morals being lost to the highest bidder resulting in elite including political capture".