Chief Executive Officer (CEO) of Gold Coast Financial Holding, Mr. Kwame Ofori Asomaning, has emphatically stated that ‘Ghana’s debt is no debt at all.’
According to him, so far as government of Ghana does not run short of laws, there is no way it can run out of Ghana cedis.
Mr. Ofori Asomaning made the observation during the 3rd BTA/Gold Coast Business Summit which was organised in Accra recently.
It was on the theme: “Ghana’s Debt In Perspective—What’s the Way Forward.”
Understanding Ghana’s debt, the CEO of Gold Coast Financial Holding said one must first know what money is.
Money, he explained, has two sides ‘just like a coin.’
One side represents a debt to the issuer and the other an asset to the debt holder, he said.
He noted that “money is issued as a form of debt, adding that all financial debt is money.”
“Money today is a type of IOU—I OWE YOU. Every form of money is an IOU, a form of debt.”
However, Mr. Ofori Asomaning, who is also a lecturer at the University of Ghana Business School (UGBS), pointed out that money is special “because everyone in the economy trusts that it will be accepted by other people in exchange for goods and services.”
“Bank savings accounts, current accounts, money market accounts, corporate bonds and T-bills/bonds all are types of debt and money. M0, M1, M2 and M3 are all debt,” he further explained.
The only difference between the above, he said, is their level of liquidity and maturity.
“Every form of debt is backed by collateral and the value of every debt is based on its collateral. For most currencies gold and silver used to be part of the collateral until 1973. The collateral for the cedi today is solely the “Full Faith and Credit” of the Ghana government.
…Take a look at any Fiat (paper) Currency, e.g., British Pound, (“promise to pay” the holder of the note); American Dollars, (“this note is legal tender for all debts public and private); all countries issue currency as a “note,” he said.
The Ghanaian cedi, he indicated, is a legal tender for the payment of any amount.
“The face value of the cedi note is controlled by our laws, which the government can arbitrarily change at any time, without limit. E.g., redenomination, Ghc50 issued.
…A “note” is an IOU and a proof of debt to the issuer. When a person or entity incurs a debt, he (or she) signs a “promissory note” in which a pledge is made to repay that debt.
To the holder, the UGBS lecturer said, money is just like a certificate/title/receipt.
“That piece of paper is just the title, evidence of ownership to a cedi. One cedi bill, a check for one cedi, a wire transfer of a cedi, a savings account passbook showing a balance of one cedi, all are legal representations of that same GHs cedi.”
In the opinion of Mr. Ofori Asomaning, the cedi is not a physical entity.
“It is nothing more than an accounting notation — i.e., numbers in an account. (Ben Bernanke) Mobile Money and Digital Money confirm this.”
According to him, money as an IOU must be owned by an entity other than the entity that issued or created it.
This, he said, means the issuer cannot borrow its own IOU.