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Dr Ngozi Okonjo-Iweala, the Director General of the World Trade Organisation (WTO), says Ghana’s debt structuring should be a “sad lesson” for African countries to build fiscal buffers during economic prosperity.
She said African countries must be deliberate with building fiscal buffers to cushion their local economies and make them resilient to uncertainties and shocks which might be internal or external.
“There has to be in place fiscal rules that prevent that (debt restructuring) from happening in the future,” she said during a dialogue programme organised by the Institute of Economic Affairs (IEA) Ghana.
The former Nigeria’s Minister of Finance said though she sympathised with the country for having to go through the ordeal of debt restructuring, she admitted Nigeria’s US$30 billion debt restructuring which had no backing from the International Monetary Fund (IMF) was more austere.
“I must confess to you that the programme I put together with my economic team was harder than the IMF programme. But the people accepted it, so it became our own programme.
“And actually, it led to the creation of a new instrument at the IMF which is a policy-based instrument where you do your own restructuring without the money.” Dr Okonjo-Iweala said.
She said Nigerian citizens at that time made the decision not to approach the IMF, hence had to take a difficult path of economic recovery that lasted about two and half years to get stakeholders on the same page.
She advised Ghana to negotiate with the IMF to exempt social interventions and development programmes from restructuring to ease the austerity on vulnerable citizens.
Dr Okonjo-Iweala also said the Government must among other things work to improve macroeconomic management to justify reliefs and restructuring and get a creditor country to back it through the debt restructuring process.
“Out of all your creditors, there must be one of them who can go round persuading others and most of the time, it should be your largest bilateral creditor who should take that lead. If they are ready to give certain terms, then that means that the others will also be ready.
“And I think that is one of the challenges that Ghana is facing trying to get that done. we were able to persuade the British who were our largest creditor at the time,” she said.