A former finance minister, Seth Terkper, has proposed that government should set up a “bad bank” where it could sell current bonds until the economy bounces back.

The move according to him is to leverage development partners including the World Bank in order to relieve some affected persons in the debt exchange programme.

He also added that other countries in the past adopted the same approach in their difficult financial times.

The US he noted made a profit of US$3 trillion when it sold the ‘bad’ bonds after the crisis.

“This is what happened during the global financial crisis where governments stepped in. We can prevail on the development partners – the World Bank and others who have had experience in this to set up a fund to pay those who are really in need or set up a ‘bad bank’ and when the time is good you can buy back the bonds,” he is quoted by myjoyonline.com.

“Look, the US Treasury – Federal Reserve when it bought the bad debt from the banks, it offloaded those bonds when the condition improved and made 3 trillion US$ profit which was given to the treasurer and the US put the funds aside,” he added.

Seth Terpker also recommended that some financial institutions that hold big stakes in government bonds can also be leveraged in this current state of the economy.

“The solution may be fiscal or monetary. There are financial institutions, especially those we called primary dealers, those who buy the most government bonds – the ones who can even come in and stand in for the government when the auction is failing. They may be more liquid, so we may want to prevail on them to set up funds.

“If somebody wants to offload out of hardship, we can determine the criteria for those who have to pay children’s school fees and whatever we invested in the bonds for various reasons. They [bondholders] can go to these institutions, offload their bonds for a discount, and when the conditions improve, they can sell at a higher rate,” he said.

SSD/BOG