Fiscal Discipline Crucial as DDEP Bond Restrictions Expire – Analyst

Economic Analyst Emmanuel Boateng has cautioned that government must exercise fiscal discipline as it resumes domestic bond issuance following the expiration of restrictions imposed under the Domestic Debt Exchange Programme (DDEP).

His comments come on the back of a statement by the Ministry of Finance announcing the end of the DDEP-induced restriction on domestic bond issuance.

Speaking on Business Breakfast on Zed 101.9, Mr. Boateng acknowledged that issuing longer-term bonds could reduce government’s exposure to short-term market volatility.

“There is financial risk in the near term, and once you have fewer frequent actions, then you are less exposed to short-term market volatility,” he explained.

However, he warned that longer-dated bonds come with their own risks, particularly when issued at high yields.

“Longer-term bonds commit government to interest payments over extended periods of time. If you issue them at higher yield, they can increase long-term debt servicing costs,” he noted.

According to Mr. Boateng, the sustainability of the new strategy will hinge largely on government’s ability to maintain fiscal discipline, especially in the areas of revenue mobilisation and expenditure control.

“The sustainability of the strategy depends on fiscal discipline, specifically revenue mobilisation and expenditure control. If you don’t have those two under control, maturity extension alone will not solve the structural debt challenges we’ve been in,” he stressed.

While admitting that the resumption of bond issuance could enhance debt management, he emphasized that it must be accompanied by prudent fiscal management.

“Yes, issuing bonds improves our debt management, but it must be accompanied by fiscal prudence,” he said.

The analyst also warned against the temptation to treat renewed access to domestic borrowing as an opportunity for excessive spending.

“Let us not say that new money is going into the economy and we are going to be able to do a lot of things, and as a result we just spend. I don’t think that is good. Our spending must still be efficient,” he cautioned.

He urged policymakers to remain focused on long-term sustainability rather than short-term gains.

“We should still have our minds and our eyes on the future,” he stressed.