In commemoration of Global Money Week 2023, JA Ghana has organised a series of events to promote financial literacy among young people in Ghana. The events include a Teen Talk on Financial Literacy with JHS students at the Dansoman Cluster of Schools and an Essay Competition which will precede a Financial Literacy Debate Competition for Senior High Schools in April.
High school students were given the opportunity to express their views on various financial matters, including the Government of Ghana’s domestic debt exchange programme, which has been a major concern in the country. The following are excerpts of the voices and sentiments of high school students on the subject.
The Domestic Debt Exchange Programme (DDEP) is an initiative by the government of Ghana to restructure its domestic debt by exchanging existing bonds with new bonds of longer maturity.
In a co-authored essay by Sowah Freda, Narkie Nartey Priscilla Eunice and Akuetteh Martha of O’reilly SHS, they expressed belief that the programme could have the opposite effect. They noted that “The government is essentially locking itself into a reduced interest rate environment by exchanging its present high-interest, short-term domestic debt for lower-interest, longer-term debt.
The government might end up paying more debt service costs than it would have if it had kept its current debt profile if interest rates were to rise in the future. This might have a detrimental effect on the nation’s fiscal stability and constrain its capacity to fund important infrastructure and social programmes.”
Others are concerned about the potential impact of the DDEP on an already wobbly investments sector in the country. In another co-authored essay by six students of Achimota School, namely; Frederick Essandoh Arkoh Junior, Charles Tetteh Mensah, Juliet Asante Konadu, Delphina Yeboah, Audrey Lomotey and Shanice Acquaye, they noted that “The high standards of living in the country significantly marginalizes the ability of the ordinary Ghanaians to invest.
This, coupled with the frequent activities of runaway banks and microfinance companies has dwindle the investment sector of our country to an extent that market women would rather hide their money under their beds than put it in a bank to earn a few more cedis.”
On the other hand, other students felt the programme has the potential to change the investment landscape in Ghana. According to Jasmine Kondor, Sylvana Teiman and Joshualyn Akushie of St. Mary’s SHS “The launch of the DDEP has proven that government bonds and securities are not as secure as we once thought. It will motivate individuals to instead invest in other securities on the capital market like shares and stocks, which would mean that instead of a complete decline in investments in the country, there would be a profitable shift to the other securities for investors”.
However, there are potential risks associated with the programme. Ama Adadzewa Saah from Alpha Beta Christian College noted that “Individuals affected by the DDEP would lose interest in saving their money in financial institutions which would result in the low capital accumulation for financial institutions. Consequently, they would be unable to grant loans to businesses, which could hinder business expansion and may deny a young entrepreneur the needed capital to start a business.”
This sentiment was echoed by Manuel M. Offei of Accra Academy, noting that “As a result of the DDEP, financial institutions would experience declines in their profit margin… The rate of investment would decrease eventually because Ghanaians are widely risk intolerant. As a result, financial institutions like banks, insurance companies and co-operatives would experience drastic fall in capital for their daily operations.
Investment firms who are not stable enough would not get enough capital to cover their operational cost and to some extent, their fixed cost because they become inefficient and ineffective and after a period of time must eventually shut down. This further impedes the development of the country”.
Other students expressed concern that the programme could have far reaching consequences on the social fabric of the country. According to Isaac Azumah, Jurist Kwaakye And Elvis Owusu, of St. Thomas Aquinas SHS, “Firms and industries whose capital is reliant on the investments will either lay-off workers or go completely out of business. This will bring about unsolicited troubles like increment in the dependency ratio, escalation of unemployment rates and disruption of peace and stability.”
In contrast, others expressed belief that the government and country as a whole could benefit from the programme. Ahlijah Michel Woedem and Gedie Albert from St. John’s Grammar SHS suggested that “The financial burden on the government would be reduced since they would not pay huge interest on money borrowed from financial institutions. The government would then have the opportunity to use the grants given to them by the International Monetary Fund (IMF) to fund developmental projects instead of using it to service the ever-growing debt.”
They believe that the programme could lead to lower borrowing costs for the government, which could free up more resources for public spending and investment in critical sectors such as healthcare, education, and infrastructure.
In her concluding paragraph, Ama Adadzewa Saah from Alpha Beta Christian College suggested that the government should have explored other measures instead of pursuing the domestic dept exchange programme, the government.
She suggested that “Ultimately, I believe that the DDEP is not the best solution because it will have detrimental effects on investors and discourage future investments. It is meant as a solution to the problem of Ghana’s failing economy but, unfortunately, it can birth a plethora of new problems which could break the economy.
I suggest that instead of cutting down on interest the government offers to its bondholders, the government should cut down its expenditure on luxurious endeavours to save money for Ghana’s development. It should also avoid borrowing where possible so as not to increase our already crippling debt burden.”
Overall, the insights shared by the students highlight the importance of financial literacy and education, as well as the potential benefits and risks associated with the Government of Ghana’s domestic debt exchange programme. It is important for the government to manage these risks effectively to ensure sustainable economic growth and development for the country.
Read the full essays of the students on jaghana.org/news and prudential.com