Ofori Atta’s exit won’t affect debt treament talks — Economists

The exit of Finance Minister, Ken Ofori-Atta, will not in any way affect ongoing external debt restructuring talks and the country’s programme with the International Monetary Fund (IMF), economists have assured.

Dr Said Boakye, who is the Head of Research at the Institute of Fiscal Studies (IFS) and Professor Peter Quartey, Director of the Institute of Statistical, Social and Economic Research (ISEER), were of the strong conviction that the exit of the finance minister had been long coming and, therefore, the news does not come as a shock to the country’s bilateral and commercial creditors.

Their observation is against the many fears expressed by people from different quarters who held the view that the development, albeit expected, would hurt the ongoing external negotiations because of the twist the newcomer might introduce in his quest to align his policies with the new flag bearer of the ruling party.

Mr Ofori-Atta, Ghana’s longest-serving Finance Minister, has been under incessant pressure since last year to step aside, with the Majority members of his party in Parliament backed by members of the minority joining calls by the public for his exit from the ministry because of what they collectively described as failed economic policy implementation which has worsened the living conditions of the people and thrown the country into unprecedented debt.

The President, at the time, pleaded with members of the Majority to exercise patience and allow the minister to conclude a deal with the IMF, which he had started at the time.

But as part of a wider Cabinet reshuffle which saw the removal of 18 ministers on February 14, the President finally succumbed to pressure from all sources by replacing the Minister of Finance with the Minister of State in Charge of Finance, Dr Mohammed Amin Adam.

Dr Amin Adam now has the task of completing the country’s external debt restructuring, as the country seeks to restructure external debts of about $20 billion, out of which $13 billion are in Eurobonds.

Already, following Mr Ofori-Atta’s exit, research institute, Morgan Stanley released a paper which outlined some downside risks to the country’s debt restructuring negotiations.

The paper indicated that the exit had forced government bonds to tumble on the day of the announcement, noting that the optics of changing a finance minister this close to completing the external debt restructuring had weighed on the bonds, with prices down.

“We think a reaction stems from the uncertainty regarding how the new minister views the current negotiations concerning key discussion points such as the value recovery instrument (which is under consideration) and the restructuring timeline,” it noted.

A note maturing in 2026 fell 0.55 cents on the dollar to a three-week low of 46.5 cents, according to data from Tradeweb.

No cause for alarm

But in a sharp rebuttal to the development, Dr Said Boakye, in an interview with the Graphic Business, was convinced that there was no cause for alarm, explaining for instance that the domestic debt restructuring had been completed, with discussions with the external creditors also at an advanced stage and ,therefore, the latest development does not present any challenges going forward.

“The IMF is heavily involved in our external debt restructuring and it’s the whole government which is dealing with them so any finance minister who will come in will be briefed on the progress.

I don’t think it will have any impact. If it had been earlier when he had just started, perhaps it would have had some impact but even that will be very minimal,” he stated.

He said although it was the politicians who lead some of these discussions, the real work is normally done by the technocrats at the ministry who have all the records and history and could ,therefore, brief whoever is in charge on the progress.

Dr Boakye added that, “if the exit were a shock then we could say it will have some impact but the finance minister possibly exiting has been in the news for a long time.”

Usually, what investors and the financial sector respond to are shocks which are things they are not expecting but this one is not a shock,” he said.

No challenge ahead

Professor Peter Quartey, for his part, said he does not foresee any challenge with the external debt restructuring process because the finance minister does not go for the negotiations alone.

“He goes with a team of competent people from the Bank of Ghana, the Ministry of Finance and other key government officials so I don’t think his exit will affect things significantly.

There is only going to be a new face leading the team but it shouldn’t affect discussions so far. There is continuity in leadership in governance so that should not be a problem,” he stated.

He said the investors should ,therefore, feel comfortable because there have been lots of agitations from the public for the exit of Mr Ofori-Atta.

“It was the noise for his exit that would have rather unsettled the investors but if the minister has now exited and the team is still intact, there is no cause for alarm. Besides, the new face is not new to the ministry to create any challenge for the investor community.

“Perhaps, it might even bring some renewed confidence because they would want to see what fresh ideas are coming on board,” he added.

Assurance 

The Minister of Finance, Dr Amin-Adam in a post after his announcement said it was important to note that the country was under an IMF programme, giving an assurance to the IMF and business community that he would ensure that the programme would remain on track.

“I will work to ensure that the programme does not suffer,” he stated.

The IMF Managing Director, Kristalina Georgieva, in a letter dated February 15 congratulated Dr Amin-Adam on his appointment as Minister of Finance.

“Your leadership will be essential in sustaining Ghana’s reform effort and in further extending the current momentum of compelling programme performance and gradual economic stabilisation.

“I would like to assure you of the IMF’s continued commitment to support you in these endeavours,” she stated.