Williams Peprah, an associate professor of finance at Andrews University in Michigan, recommended that the government negotiate a long-term repayment plan with China for its foreign debt.
He said China had not been known to lower debt interest due to its efforts to influence its geopolitical presence around the world.
He further argued that China is classified as a developing country that relies heavily on interest payments as its main income.
Professor Peprah, in an interview with Joy Business, warned that Ghana could lose time if it does not opt for a long-term debt repayment structure.
“Our government should instead negotiate a long repayment period. The Chinese are not interested in negotiating debt reduction because once they negotiate, more countries will come forward demanding similar treatment. Because I feel it.”
Referring to the examples of Zambia and Sri Lanka, Professor Peprah recalled that China has been reluctant to approve debt restructuring plans for these two countries, putting them into difficult economic situations.
He argued that it would be very difficult for China to accept a haircut of as much as 20% on Ghanaian interest rates.
“It is unclear whether China will make the 20-40% reduction that the finance minister is expecting. Zambia gave a 1.0% haircut on coupons, which are interest payments rather than principal. Sri Lanka’s In this case, the payment process has been extended. On this basis, it will be difficult for Ghana to get what the Minister is expecting,” he stressed.
Professor Peprah presented some ideas and advised the government to spread the payment period over a longer period of time to give room for loan repayments.
“This could be one way because China gets a lot of income from interest payments. They are classified as a developing country, so they are seen as just not having many resources to offer. ”
He said the government should have studied how China has conducted debt restructuring negotiations in the past to guide its proposals.
He warned that if the restructuring dragged on, the country could face balance of payments problems and delay the disbursement of the IMF’s second tranche of $600 million.