In a recent national broadcast, Prime Minister Dr. Godwin Friday revealed that his administration is actively pursuing debt swaps as a central component of a strategy to stabilize the nation’s “tenuous” fiscal position and reduce the burden of high-interest repayments.
Facing a national debt currently standing at 113% of GDP, the Prime Minister emphasized the urgent need to “swap out” expensive loans for more favorable terms.
Prime Minister Friday highlighted the severity of the current economic landscape, noting that debt servicing now consumes 39 cents of every dollar the government earns.
Without “corrective surgery,” the debt-to-GDP ratio is projected to climb to 124% by the 2029-2030 period. The Prime Minister described the situation inherited by his administration as “unhealthy,” pointing to a history of spending that drove debt to unsustainable levels.
To address these challenges, the government is “exploring possibilities vigorously” to implement debt swaps. This strategy involves taking on new debt at lower interest rates specifically to pay off and replace older, more costly debt.
According to the Prime Minister, these new arrangements will be tied to specific development policy goals, a model already utilized by other countries in the region.
Beyond debt swaps, the Prime Minister outlined a broader shift away from expensive local and bilateral loans toward concessional funding from international development institutions. He noted that the government recently joined the Central American Development Bank (CAF) and is engaging with the World Bank and IMF to access capital with more “generous” terms.
This shift is particularly critical following a recent downgrade by Moody’s from B3 to CA1, which has made traditional international borrowing more difficult and sent a negative signal to global financiers.
The Prime Minister underscored that while debt swaps provide immediate relief, they must be paired with political discipline and fiscal rules to ensure long-term sustainability.
He asserted that the administration’s goal is to “stabilize the ship” by controlling expenditures and fostering a more effective partnership with the private sector to generate economic growth. “You’re not going to grow out of the debt situation… simply by being more efficient,” Friday stated, “The key thing is to generate faster economic growth in the economy”.
