My take on government’s cedi equivalent bond
Well, as some friends are asking me to comment on the new government’s bonds via this month’s jumbo debt auction as Bawumia talked about. Here is my comment.
In actual sense, what Bawumia and his economic team have done has indeed saved Ghana huge amount of money. Indeed, over $300 million has been saved as Bawumia confirmed.
What the government has simply done is that, all the bad loans contracted by the NDC/Mahama government with the inconceivable high interest rates, the new gov’t has offered it as bond for $2.2 billion with far lower interest rate, and has used the money received to pay off all the bad loans of NDC which would have been paid within the same period if the NDC bad loans were to be paid untouched.
In simple terms, e.g. let’s say the NDC government took a loan of $2 billion with an interest rate of 25% to be paid in 15 years. Looking at this huge interest monthly in Mahama Loans, the new government auctioned this same loan fir lower interest rate for a bond of $2.2 billion and has received a lower rate, let’s say an interest rate of 17%. The new government has then used that money received to pay off the NDC bad loans with that high interest rate of 25%.
What it simply means is that, for example, if Ghana was to pay $25 million per month to cover for Mahama/NDC bad loans, the Akufo-Addo says that is too much. The Akufo-Addo gov’t has rather paid off that bad loans and has stopped paying any interest on it, and then now Ghana will pay only $17 million/month instead of paying $25 million per month and finish paying within the same period. Isn’t this a good idea? Juxtapose the two ideas and just add all the difference that Ghana should have paid for 15 years on John Mahama loans and let me know how much Ghana has saved under Akufo-Addo’s approach. Can one now see the savings therein? This is what we called prudent and sensible management of debts with skills.
For instance, let me break it down further using another example of UK banks model. In UK, from time to time, customers would receive an offer from their bank enticing their anybody with very good offers that if you could transfer all your loans taken from other banks onto their bank and consolidate all your loans into one loan (with them), they offer you very low interest rate on the total compared with what you should be paying to your existing lenders/banks.
Again, the bank also can offer that just by consolidating all your loans onto one account with them, you will not pay any interest on the total until after one year. Unquestionably, these offers do help the struggling people to control their bad debts and manage them as well and still pay lower interest on the total debt. This idea also helps the banks to attract more customers. Can one see the essence of the idea herein?
Honestly, I have a strong conviction in me, and I believe many others do as well, that this new Ghana gov’t economic management team are working diligently and will continue to work with genius-mindedness to bring back the lost hope in Ghana. The Hope that is returning with excellence. The Hope, that gives birth to a renewed confidence in the people.
Sometimes it is very unfortunate that some Ghanaians don’t want to read and learn to understand things for yourselves. Rather, all they know is to listen to the absurd and weak-minded NDC ignorant propaganda that has no substance.
Peter Antwi Boasiako.
London
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