According to reports, a debt restructuring scheme could potentially effect GH3.7 billion of the GH3.9 billion in Tier 2 pension contributions, or 94% of the total amount invested in government assets.
In an effort to make sure that its debt is manageable, Ghana has started having discussions about a potential debt restructuring scheme.
This is because the government is asking the International Monetary Fund to provide financial assistance.
However, a debt restructuring will affect the returns on investments when the yield-to-maturity period is extended or a ‘haircut’ policy is implemented.
Debt restructuring simply means when a country or company reviews the terms and conditions of the payment of loans in order payment easier or more flexible.
A ‘haircut’ policy in debt restructuring, on the other hand, refers to when interest rates on outstanding debts are reduced.
From this narrative, in the case of Ghana, when debt restructuring happens, returns on Tier 2 pension contributions will reduce thereby affecting the maturities of the securities.
The Tier 2 contributions have been largely invested in government bonds due to their low-risk factor.
Meanwhile, a five-member committee has been constituted by the government to lead discussions with financial sector players on Ghana’s debt management.
The Finance Ministry noted that: “The Committee will be consultative and will among other things lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry concerns on debt management strategy to the MoF and BoG.”
“The stability of the domestic financial ecosystem is critical to a successful IMF-supported economic programme. The Government will take all necessary steps to protect the sector as we have done in the past,” the statement said on October 11, 2022.