Speaking in a Good Evening Ghana interview, on Monday, January 31, 2023, Alan posited that the current plan of the government is not the best and it will harm individual bondholders as well as businesses.
“The 10,10,10 (Solution) that was earlier proposed was that there will be a 10 per cent haircut in the principal of bonds held by institutional bondholders. And then there will be a shorter maturity period of 10 years and then also there will be a 10 per cent interest that is paid on their total bond holding.
“So, 10 percent reduction in principle, 10 per cent interest for a maturity period of 10 years. What is on the table now is 0 percent for 2023, 0 percent for 2024 and in the subsequent years 5 percent, (which is a) very complicated formula,” he said.
Alan, a former Minister of Trade and Industry, also said that individual bondholders will not be included in his proposed debt restructuring programme.
He explained that government does not need to include individual bondholders in the programme because only 80 percent of its debts are required to be part of the programme.
“The requirement under the funds (the International Monitory Fund’s) parameters is that 80 percent of your total debts must be subject to this exchange… institutional holders have almost about 70 percent (of the government’s debts) and 15 per cent is held by the Bank of Ghana.
“So if you combine Bank of Ghana and let’s say the banks, insurance and other entities, you will have more than 80 percent of the total bondholders that will have been subject to this debt exchange in which case the vulnerable groups that you are protecting are not up to 20 percent,” he explained.
He added that institutions that will be included in his proposed programme will be given some assistance to recover.
The Ghana Association of Bankers and the Institute of Chartered Accountants Ghana met with the Council at its first meeting, which was held on January 25, 2023.
The purpose of the conference was to assist the Council in providing the appropriate recommendations to the authorities regarding actions to lessen the effect of these financial difficulties on bondholders.
This has been necessitated by the urgency and importance of the Government Domestic Debt Exchange programme for a successful conclusion of negotiations with the International Monetary Fund (IMF).
In a statement issued on January 27, 2023, the Council assured the public that, in line with its maill continuously engage relevant institutions and groups and make recommendations to the authorities.
These engagements were held to bring the Council to terms with the realities so as to make better and informed recommendations to the appropriate authorities. The exemption of pension funds from the Domestic Debt Exchange Programme was an outcome of such meetings held.
Governor of the Central Bank, Dr Ernest Addison, has said the Bank of Ghana and the Ministry of Finance will commit to zero financing of the budget in 2023 and beyond.
According to him, the move forms part of prudent macroeconomic policies which are expected to trigger a disinflation path and downward trends in the policy rate.
Speaking at the 60th-anniversary launch of the Institute of Chartered Accountants Ghana (ICAG), Dr Ernest Addison, explained the move will further restore the country’s reserve buffers to at least 3 months of imports cover by the end-2025.
“Monetary financing of the government deficit, which was pursued to prevent domestic defaults arising from systemic auction failures during 2022 will end under the programme,” he stated.
“With inflation currently at 54.1 percent, tight monetary policies are expected to contain the persistent price shocks in the economy and ease inflationary pressures,” Dr Addison added.
The BoG Governor however noted that all these projections hinge strongly on the successful attainment of an IMF programme.
“The core objective of the DDEP is to harness the fiscal consolidation agenda and its successful implementation is expected to improve the debt metrics, complement the current monetary policy stance, and reset the economy to macroeconomic stability,” he concluded.
A visually impaired supporter of the New Patriotic Party (NPP) by the name of Agya Bray, has shared the experience of his GHc50, 000 investment at Databank being locked up due to the ongoing Domestic Debt Exchange Programme of the government.
Speaking in an interview on Akoma FM, Agya Bray, who sells medical products, said that he went to the bank to withdraw his investment, which had matured, only to be told that there were no funds available.
He added that the bank told him that if he insists on getting his money back, he will have to lose GHc16,000 of his investment.
“I did not invest in a government bond. In 2007, I invested ¢500,000,000 (GHc50,000) in products of Ken Ofori-Atta’s Bank (Databank), called the M-Fund and F-Fund. I went there for my money this past Tuesday, and they said that they don’t have any money for me.
“They told me that they can’t give me any money, and they were saying some things about haircuts and the IMF bailout the government was seeking. And I asked them why the government should be using my money to borrow from the IMF.
“Then they told me that if I wanted my money, they would let someone pay me, but I am going to lose ¢160,000,000 (GHc16,000),” he said in Twi.
The NPP supporter said that he has always voted for the party, but if people like him lose their money due to the government’s debt exchange programme, they will abstain from voting in the upcoming 2024 elections.
“In a little under six weeks from today, Ghana will mark sixty-six (66) years of nationhood. Far from being an occasion to celebrate independence and the successes and achievements of nationhood, we will mark this day under the yoke of the worst economic situation in decades.
“We are currently bankrupt and burdened with national debt we are simply not able to pay. You may have learnt over the past few weeks that the Ghanaian government has defaulted on servicing of both external and domestic debt.
“There is currently a huge uproar over a controversial debt restructuring programme under which the middle class of Ghana could be wiped out if plans to have them forfeit proceeds of government bonds on which they rely for investment and sustenance are followed through.
“In absolute terms, up to about six (6) million people could be deprived of their life savings and investments. Ghana’s banking and financial sector could also be under threat of insolvency if no suitable adjustments are made to the debt restructuring plans.,” the former President said.
He also called for dialogue on the debt exchange programme stressing he was not against it.
“I am not opposed to debt restructuring. What has been the contention is the lack of dialogue and consultation with the debt holders on the domestic side. I know that negotiations are taking place with the bondholders on the external side but not the same treatment on the domestic side.
“I have been an advocate for dialogue. Before this whole crisis started, I advised the government and said they should hold a national dialogue on the economy, give us the state of the economy and let everybody understand and after that seek broad consensus behind the economic programme. But this was never done and what we expected will happen, happened.”
Government has reached understanding with the Ghana Securities Industry Association to sign up for the Domestic Debt Exchange (DDE) programme, reports coming in indicate.
According to sources, the Association’s terms will be similar to what the banks and insurers have secured in terms of the 5% Coupon Payment and 9% for the 12 New Bonds that will be issued.
There will also be a Stabilization Fund established as well for the industry.
Reports say the government is likely going to propose some new terms for individuals with investments in collective schemes and mutual funds.
Sources also suggest that government is set to propose some favorable terms for individual bondholders with an announcement expected soon.
This development means the Finance Ministry has covered some more ground in ongoing negotiations with various categories of bondholders.
It is, however, unclear yet the impact it will have on the discussions with individual bondholders and pensions.
But Myjoyonline.com is reliably informed that government is content with the situation and hopes it dovetails into the other deals it is currently brokering with other associated groups.
The Vice President, in charge of research at IMANI Centre for Policy and Education, Bright Simons, has alleged that Jubilee House officials and members of the Economic Management Team (EMT) are against the inclusion of individual bondholders in the Domestic Debt Exchange Programme (DDEP).
In a series of tweets on Thursday, the Founder and President of mPedigree also alleged that the Ministry of Finance is lacking the support of even Cabinet in its decision to include individual bondholders in the Debt Exchange Programme.
His tweets come after the Individual Bondholders Forum insisted on the complete exclusion of its members from the Domestic Debt Exchange Programme, stating that their inclusion will destroy household confidence in Ghana’s financial system and securities market.
How long can Finance Ministry hold out against sentiment in Ghana’s Economic Management Team that individuals must be formally exempted from the debt exchange program? And now reports of Jubilee House also moving in that direction. Ministry insists 5% in 2023 is last offer.
Meanwhile, the Finance Ministry is pretty isolated at Cabinet this afternoon. Will be interesting to see whether their nerves will hold as the rest of the government begins to buckle under pressure.
The Individual Bondholders Forum on Thursday petitioned Togbe Afede XIV, the Agbogbomefia of the Asogli State, to help them get an exemption from the Domestic Debt Exchange Programme.
Addressing the former President of the National House of Chiefs on Thursday, the Convener of the Individual Bondholders Forum, Senyo Hosi said: “Togbe the matter is an eye red matter and for someone who has led the capital market and being one of the players who birthed the capital market, besides your royal place as the Agbogbomefia of the Asogli State, you are a pioneer in this industry, I do not want to believe this is your voice and the destination you assured us when your voice was heard back then.
“So we are here to petition your office, to petition you as an individual and the state of Asogli not to sit by and watch the lives of 6.5 million people devastated and subjected to shackles of penury. So our plea here is very simple, the steps being taken by the government are unsustainable and very unnecessary.”
The Individual Bondholders Forum led by Senyo Hosi has recommended to the government to divest loss-making, defunct and troubled 17 State–own enterprises.
The Individual bondholders also suggested that the government review the Free SHS Programme to make it more efficient through effective targeting and allowing parents who can pay to do so.
According to the group, “beneficiaries should be students that patronize Senior High Schools in their communities whilst other students should pay for boarding. However, the government can pay for students who do not have Senior Secondary schools in their communities.”
The group stated that divesting the 17 non-performing SOEs and reviewing the free SHS alone will provide the government with two billion cedis.
The group also urged the government to maintain the 2022 capital expenditure level by reducing the non–ABFA MDA and foreign finance Capex provisions by 50% which they claim will provide the 10.7 billion Ghana Cedis.
Its Executive Director Dr. John Kwakye explained that while savings of GH24billion per annum could be realized from a 10% expenditure cut across the medium-term budget – from 2023 to 2026 – which is estimated to range between GH191billion and GH285billion, a similar value could be saved with targetted spending in specific areas. The report was anchored on fiscal measures – expenditure cuts and ambitious revenue mobilization as well as the need for burden sharing.
This will help government raise GH¢45billion every year between now and 2026, which will ensure the economy – particularly the financial sector – is spared from crippling shocks while providing the Treasury space to re-profile the nation’s debt.
While describing it as a “sensitive subject”, the Institute suggested that significant reductions in public sector compensations – projected at GH¢45billion in 2023 and rising to GH¢70.4billion by 2026 – could also provide much-needed fiscal space going forward.
“There is considerable room to reduce this item. However, it is not just about cutting pay – which may not even be enough in living or economic terms. There is need for a complete review of the system for public sector salaries, allowances, retirement benefits, etc. Doing so will foster fiscal and debt sustainability,” Dr. Kwakye noted.
In addition, the IEA recommended renegotiating Power Purchase Agreements (PPAs) with Independent Power Producers – targetting about half of the annual payments in the medium-term, which it says should save some GH¢12billion annually.
“Infrastructure is an essential item in the budget, given its large deficit in the country. However, in the current situation where government is struggling to pay its debt, it cannot at the same time afford the expense to deliver needed infrastructure,” the Institute noted; adding that infrastructure spending, if reduced by a third in the medium-term, could save as much as GH¢4.9billion yearly.
Other areas of focus to scale back expenditure include goods and services, energy sector debt transfers, the Office of Government Machinery and some flagship programmes.
Revenue mobilisation
While expenditure is being curtailed, revenue must also be enhanced as an added fiscal measure, the IEA noted.
Chief among them is a sweeping hike in the base tax rates for corporate entities, particularly those operating in the extractive, telecommunication and financial sectors; a move the IEA said would raise an additional GH¢15billion annually.
Reacting to concerns that such a move would overburden businesses already operating in a high inflation environment and possibly lead to the exodus of some well-established players, Dr. Kwakye insisted that current rates are among the lowest among the country’s competitors.
Other measures tabled include the introduction of an e-commerce levy to complement the electronic-levy, as well as enforcing laws on property taxes and tax exemptions.
A visiting Fellow at the IEA, Prof. Alexander Bilson Darku, emphasised that these proposals are meant to accompany the DDEP and not necessarily replace it.
He however noted that if the measures were implemented, they would allow for more favourable terms under the Programme: including shorter maturity periods for the new bonds and a new coupon regime of 8 to 12 percent, versus the current term which is capped at 10.65 percent.
“With the huge gains expected from the suggested fiscal measures, if they are implemented in full or even with partial implementation, it may render the gains projected under the DDEP not fully needed and a new version with less ‘haircut’ to bondholders could be introduced,” he opined.
The IEA’s recommendations are likely to find their way into discussions by the technical committee set up by Ministry of Finance, together with representatives from the Individual Bondholders Forum (IBF) to explore viable alternatives to the Programme’s existing terms.
The committee – formed after a meeting between the Finance Minister Ken Ofori Atta and leadership of the IBF on Wednesday, January 18, 2023 – is to, among other things, seek fiscal space in the 2023 budget to allow for exempting the most vulnerable classes of investors.
He contends that in order to ensure the program is sustainable and does not undermine advancements made in the financial sector, the government must reevaluate the plan and engage fully.
The former finance minister, who is running for flagbearer of the National Democratic Congress, expressed worry about the participation of shareholders in the DDEP during an interview with Accra-based JoyNews.
“You cannot deal with my caretaker when I have not been consulted. At the end of the day, it will fall on me the shareholder, so there is the need for them to be part of the broad consultations to express their views.” “If you don’t manage the domestic debt exchange programme properly, the financial sector will be weakened in such a way that it won’t be able to perform the role that it is supposed to perform” he explained.
Dr Duffuor however charged Ghanaians to treat the matter with all seriousness and speak up to protect the country from the dire consequences the debt exchange programme will bring in the near future.
He explained that government’s decision to include insurance claims might cause problems for financial institutions since they would have to look elsewhere for monies to pay their clients.
He said the bond of GH¢1.7 billion was very huge for example and the premiums they collect are now in the government bonds.
Dr Duffuor further expressed concern about the already dwindling confidence in government instruments and cautioned that if the debt exchange programme in its current state was not reviewed, there will be no motivation to buy treasury bills in the near future.
If the government decides to include individual bondholders, he claims that vulnerable people would lose their “appetite and willingness” to save, and he adds that this would be a disastrous development for the nation.
Since they are investing their money in secured securities rather than hiding it under their mattresses, when people buy bonds, they are essentially saving money.
“If we touch the investments from these vulnerable groups, we are also making them lose the appetize and the desire for saving and that is the most dangerous thing that could happen to a country,” myjoyonline quoted the aspiring flagbearer.
He added that having a debate about including individual bondholders scheme is creating a platform for very serious negative discourse.
“In my view, having a debate about including individual bondholders and those involved in this collective scheme is creating a platform for very serious negative discourse which could potentially create both domestic and international problems for us,” he said.
Meanwhile, convener of the Individual Bondholders forum, Senyo Hosi, In a statement on January 24, 2023, commended the government for reaching an agreement with the government.
The amendment includes an agreement to pay a 5% coupon rate for each of the twelve new bonds, resulting in an effective coupon rate of 9%.
It also added “the removal or amendment of all clauses in the Exchange Memorandum that empower the Republic to at its sole discretion, vary the terms of the exchange.”
The individual bondholders stated that “with the banks onboarding the Domestic Debt Exchange Programme, the government is set to reach its 80% target.”
“The development reaffirms the need for government to exclude individual Bondholders, including individuals and Collective Investment Schemes (CIS), who account for less than 11% of the eligible bonds. Unlike the banks and other institutions who are set to benefit from various regulatory incentives, Individual Bondholders have no fallback nor incentives and will be condemned to shackled penury,” parts of the statement read.
The NDC through its General Secretary Fifi Fiavi Kwetey wrote to the Speaker of Parliament, Alban Bagbin, to announce replacement of three members, the Minority Leader, the deputy Minority Leader and the Minority Chief Whip.
According to Asiedu Nketiah, the changes feed into the larger party reorganization plan that has seen the election of local level to national officers over the last year.
Asiedu Nketiah said in an interview with Joy News (January 24) that the fact that the economy will be a major battleground ahead of the 2024 elections, meant that the NDC needed to field their best in economics and finance as leader.
Currently, two major issues the government is facing is the Domestic Debt Exchange programme, which the Haruna Iddrisu-led Minority had asked to be suspended pending broader consultations.
Why Ato Forson in place of Haruna
On the specific reason why the NDC picked Cassiel Ato Forson (Ajumako Enyan Essiam MP) to replace Haruna Iddrisu (Tamale South MP) as leader of the Minority Caucus, he responded:
“We know for instance that going into election 2024, the economy is going to be the major battleground and so many of the debates and other discussions will focus on the economy.
“So, you better put your best man in the economy forward and that is what we’ve done,” he stressed stating that it was not for the party to consult before ringing the changes.
Other changes and retentions
Other changes included, Kofi Armah Buah, MP for Ellembele, who is the new deputy Minority Chief Whip.
While Kwame Governs Agbodza, MP for Adaklu, will replace Asawase MP Muntaka Mohammed as the Chief Whip.
Ahmed Ibrahim, MP for Banda, has been maintained as the First deputy Minority Chief Whip, while Comfort Doyoe Cudjoe-Ghansah, MP for Ada, is also retained as second deputy Minority Chief Whip.
He bases his claim on the Domestic Debt Exchange Programme’s inclusion of specific bondholders.
He claimed that the government’s choice to include individual bondholders in the scheme was an attempt to deprive them of their lifetime investments and bankrupt them.
He said “We urge the government to stay focused on its responsibility to protect its citizens and for that matter absolutely exempt individual bondholders, including individuals who hold eligible bonds under the DDE through Collective Investment schemes from its DDE programme. We maintain that cutting government expenditure and optimizing revenue is the sure winner for Ghana in these difficult times.”
In a statement on January 24, 2023, Senyo Hosi, commended the government for reaching an agreement with the government.
The amendment includes an agreement to pay a 5% coupon rate for each of the twelve new bonds, resulting in an effective coupon rate of 9%.
It also added “the removal or amendment of all clauses in the Exchange Memorandum that empower the Republic to at its sole discretion, vary the terms of the exchange.”
The individual bondholders stated that “with the banks onboarding the Domestic Debt Exchange Programme, the government is set to reach its 80% target.”
“The development reaffirms the need for government to exclude individual Bondholders, including individuals and Collective Investment Schemes (CIS), who account for less than 11% of the eligible bonds. Unlike the banks and other institutions who are set to benefit from various regulatory incentives, Individual Bondholders have no fallback nor incentives and will be condemned to shackled penury,” parts of the statement read.
The scenario is not only likely to have a negative effect on the stock market but also on investor confidence in the financial industry. Investors are trying to get their money back and are expecting coupons from their bond investments, but they are not obtaining the desired returns due to government proposals. As some investors aim for long-term investments, diversification will be a challenge, and the stock market could be impacted, according to management consultant and investment banker Augustine Baidoo, who spoke with the B&FT.
He explained that introduction of the DDEP and the current economic climate have made investing uncertain for investors, leaving them with limited options for diversification. He added that investors are therefore looking forward to a conclusive agreement or arrangement with government in order to make informed investment decisions.
Similarly, SEM Capital – in its review of fourth quarter 2022 and outlook for 2023 – stated the market is unlikely to recover fully this year due to the aforementioned factors.
With the ongoing uncertainty surrounding the DDEP, along with the not-too-positive outlook for key macroeconomic indicators, they said investor confidence will take a hit; making it unlikely for the market to recover fully this year.
Stating that it anticipates further pressure on the local currency, SEM noted that this will have an adverse bearing on manufacturing companies as the cost of importing raw materials will increase, leading to lower production and higher prices for finished products.
The Managing Director of Sentinel Asset Management, Kisseih Antonio, meanwhile noted that despite the setback to investor confidence and potential material losses, the current state of the market should lead to improved communication around investments.
“Hopefully, as we ride out this storm we will be better at communicating risk and return to investors,” he said
2022 review
In what was a turbulent year across markets, the Ghana Stock Exchange (GSE) was spared a worse decline by the performance of some financial sector stocks in 2022.
While the GSE Composite Index (GSE-CI) which measures the broad market closed the year with annual returns of -12.38 percent, compared to 43.66 percent at the end of 2021, the GSE Financial Stock Index (GSE-FSI) – which tracks the performance of financial sector stocks – ended 2022 at -4.61 percent versus the 20.70 percent return recorded a year earlier.
This was on account of major price recoveries seen in banking and insurance stocks: including SIC Insurance Company Limited (SIC), Trust Bank Gambia Limited (TBL), Access Bank Ghana (ACCESS), Enterprise Group Limited (EGL) and Ecobank Transnational Incorporated (ETI).
The development was attributed partly to the 2021 full-year performance of the financial sector, as well as the historical undervaluation of stocks in the sector.
Overall, SIC had the highest year-to-date increase with a gain of 287.5 percent; ending the year at GH¢0.31 from GH¢0.08 at the turn of the year. This reflected the market’s reaction to a stellar 2021, when the insurer grew post-tax profit by 414.6 percent to GH¢60.3million from GH¢14.55million.
Other companies that saw growth in their share prices included TBL, ACCESS, Benso Oil Palm Plantation Limited (BOPP), EGL, Guinness Ghana Breweries Limited (GGBL) and ETI, with year-to-date gains of 135.29 percent, 27.30 percent, 15.04 percent, 14.7 percent, 13.89 percent and 7.14 percent, respectively.
It was not all rosy with financial stocks, as some banks saw their share prices decline sharply. Cal Bank (CAL) recorded a year-to-date slump of -25.29 percent, with GCB Bank (GCB) at -24.81 percent; and Societe General, Ecobank Ghana and Republic Bank followed suit with -16.67 percent, -12.63 percent and -10 percent respectively.
The manufacturing sector’s woes, propelled by supply chain constraints and the rising cost of inputs, continued as Unilever Ghana Limited (UNIL), Produce Buying Company Limited (PBC), Fan Milk Plc (FML) and Intravenous Infusion Limited (IIL) closed the year with the biggest losses of -34.13 percent, 33.33 percent, 25 percent and 20 percent respectively.
Despite being the most traded stock, market leader MTN endured a torrid time in the year as its share price tumbled from GH¢1.11 to GH¢0.88 at the end of December, representing a year-to-date decline of 20.72 percent.
This was attributed, in part, to concerns about the tech giant’s profitability due to developments such as the E-levy. This resulted in a retreat by offshore investors, whose contribution to equity trades fell from 69 percent at beginning of the year to 62 percent.
A leading member of the New Patriotic Party (NPP), Hopeson Adorye, has charged the Ministry of Finance and its consultants who in his view benefitted from government bonds to take up the mantle of explaining to Ghanaians what the Domestic Debt Exchange Programme (DDEP) entails.
Hopeson Adorye claims that communicators of the governing party have been hanged out to dry by persons he believes enjoyed commissions from the bonds that have contributed to the country’s unsustainable debt levels.
The one-time parliamentary candidate of the party for the Kpone Katamanso constituency lamented on Peace FM that those who reaped benefits from the bonds have taken backstage while the persons he labels as ‘innocent’ have been commissioned to defend the DDEP.
He appealed to the Ministry of Finance to solicit the views of the Attorney-General before taking a decision on the domestic creditors.
He also urged Ken Ofori-Atta and his cohorts to exclude the individual bondholders in the arrangement, warning that any move contrary will worsen things for the government.
“We are overwhelmed by the situation. I believe by January 31 an agreement would have been reached and government would have adopted a position. We should make sure the final decision will be good news for Ghanaians. People want their money for various reasons so we should take a look at individual bondholders.
“There is a lot of money going waste that if we decide to be careful, we wouldn’t be in this situation. People have taken things free of charge and nothing happened. We have the money but we cant manage the money. We should seek the Attorney-General’s opinion on the matter. I believe the government will rescind the decision to go after the individual bondholders else we will know no peace in the country.
“Those who benefited will never come out and address the issue. When you say it, they accuse you of destroying the party but those who benefitted will never find time to explain it to the public. You are the one who took these decisions and benefitted from the bonds so you should be talking. Your consultants who benefitted should be doing the explanation on media platforms.
“They shouldn’t leave it to us the innocent people to struggle. People benefited and got commissions, they should be asking, how can you defend this? We have been overwhelmed by the whole thing so we need the consultants to come on media platforms. You can’t enjoy for us innocent people to suffer.
As part of conditionalities to achieve the IMF bailout, the government has recommended that all benefits due bondholders in 2023 will not be paid.
Per the arrangement, the payment of the benefits will resume in 2024 at the rate of 5%.
This arrangement has been widely criticized with critics saying that the government is worsening the situation of already burdened Ghanaians.
The Legal Committee of the Individual Bondholders has said that it is still studying the various legal options available before the members head to court for exemption from the ongoing Domestic Debt Exchange (DDE) programme.
According to the committee, it will be too premature to go to court.
It comment is coming at a time the Technical Committee tasked to further engage individual bondholders on their inclusion in the debt exchange programme enters day three today, January 23, 2022
Spokesperson of the Legal Committee, Thelma Tawiah said “having done our analysis, we feel that it might be too early to go to court right now because our legal rights or a cause of action has not accrued”.
“The government keep saying that the DDE is voluntary, and if you run to court, their response will be it’s voluntary. So, why are you in court wasting the court’s time.”
Meanwhile, Joy Business, is learning that government has reached a deal with banks and insurance firms under the DDE programme. There are also some changes made to the Invitation for Exchange for individual bondholders as well as pensioners.
Pensioners Bondholders Forum has rescinded its decision to picket at the Finance Ministry today, Monday, January, 23.
Earlier, the forum announced its intentions to mass up at the Ministries after the government’s decision to include pension bondholders in its Domestic Debt Exchange Programme.
Speaking to the media on January 13, 2023, the Convener of the Forum, Dr Adu A. Antwi, revealed that it had previously petitioned the government concerning the said issue, yet that has still not yielded the desired results.
“We have also petitioned key stakeholders in the country, including the Speaker of Parliament, the Council of State, the National House of Chiefs, the Christian Council of Ghana, the Office of the Chief Imam, the National Peace Council, and the Catholic Bishops Conference, about our displeasure on the issue,” he added.
The forum informed the police about its plans to gather at the Ministry of Finance. However, the pensioners indicated in a press release issued prior to the protest that it had already started the process of engagement with former Presidents John Agyekum Kufuor and John Dramani Mahama.
This, it explained is “to seek their sympathy, support, and intervention for our cause.”
It added that “As a result of these engagements, we have cancelled our intended convergence at the premises of the Ministry of Finance on Monday 23rd of January 2023, and informed the Police accordingly”.
However, the forum was quick to add that should the engagements birth to no results, it will have no other option than to “take action should the need arise.”
As part of Ghana’s Domestic Debt Exchange Programme launched last year, bondholders were encouraged to willingly exchange about GH¢137 billion in domestic notes and bonds of the Republic for a package of new bonds.
In light of this, a series of four new bonds with maturities in 2027, 2029, 2032, and 2037 were to replace the old domestic bonds as of December 1, 2022.
In 2023, this new series of bonds will have 0% coupons, followed by 5% coupons in 2024 and 10% coupons beginning in 2025, whereby, coupon payments will be made every six months.
The government has reportedly rolled over cocoa bills which matured on Thursday, January 19, 2023, without the consent of investors.
According to a report by 3news.com, the move by the government has created some commotion in the investor community.
The report indicated that one of the affected persons who spoke to 3news said that the investors whose cocoa bills were matured were paid only for their accounts to be quickly debited, which led to some agitations between some bill holders and their banks.
“I received payments and was planning to move the funds to my business account to pay some bills, only for me to see that the transaction has been reversed. I don’t know how to pay my suppliers now,” the investor is quoted to have told 3news.
The report also indicated that cocoa bill investors received a notification that their bills have been rolled over at a yield of 30.78 percent with July 20, 2023, as the maturity date.
It added that holders of short-term cocoa bill instruments, which were issued on July 21, 2022, and matured on January 19, 2023, were the persons affected.
It is unclear whether the roll-over of the bill forms part of the government’s Domestic Debt Exchange Programme because short-term instruments like cocoa bills have been exempted from it.
The Christian Council of Ghana (CCG) has asked the government to suspend its Domestic Debt Exchange programme (DDE) and pursue wider engagement with stakeholders.
The CCG in a January 19, 2023 statement signed by Rt. Rev. Prof. J.O.Y Mante said it had arrived at that position after keenly following public debates and talking to some affected parties.
Their call for engagement, the statement noted, was because they had “identified lapses in the debt restructuring programme, a major one being lack of consultation with affected individuals and institutions.”
The statement continued: “With the current economic hardships in the country and the agitations among the general public, it is in the nation’s interest for the Finance Ministry to suspend the 31st January deadline given to individuals to sign on to the program and rather propose a road map for dialogue to make the process participatory such that the outcome would be acceptable to all.”
The government has failed to secure a debt restructuring deal with domestic lenders, postponing a deadline for the DDE thrice, the latest deadline being January 31, 2023.
The DDE is seen as a crucial requirement to secure a programme with the International Monetary Fund (IMF) following a torrid 2022 in which the economy suffered from rising inflation, massive depreciation of the Ghana cedi and the rising cost of living.
The government has repeatedly blamed the crisis partly on the aftershocks of the COVID pandemic and the ongoing Russia-Ukraine war but has promised to turn around the economic fortunes of the country after sealing a Staff-Level Agreement with the IMF late last year, with hopes that funds from the US$3 billion facility will be released early this year.
The government is hamstrung by hurdles as it attempts to secure a debt restructuring programme at home. Processes are underway to restructure external debts too, Finance Minister Ken Ofori-Atta disclosed to Accra-based Joy FM on January 18.
Organized labour successfully fought off plans to include pensions in the DDE; now individual bondholders are also rejecting plans to include them with talks ongoing on a mutually acceptable way forward.
The government says it is optimistic of achieving 80 percent of the bond debt swap under the Domestic Debt Exchange Programme by January 31, 2023.
An 80 per cent participation by individual bond holders, according to the Finance Minister, Ken Ofori-Atta would help the government to get into the perimeters of 55 percent debt to Gross Domestic Product (GDP), essential to achieve an IMF deal.
The government is seeking a US$3billion IMF bailout to balance its books as its debts have over swallowed its income.
Speaking to the media after a meeting with individual bond holders on Wednesday evening, (Jan 18), Mr Ofori-Atta said, “this is a voluntary exercise and we made some changes to extend it to January 31st to give us time to incorporate all ideas that has come up. We anticipate 80 per cent participation to ensure that we are within the parameters.”
IMF Bailout under threat
Government is racing against time to conclude a US$3 billion facility that is hoped to stabilise the economy which is currently choked with debts, with total debt currently at GH¢467 billion as of December 2022.
Analysts have warned that if the deadline for all creditors to sign up the government’s DDE programme was not met, it would have dire consequences on the economy. Individual bond holders have rejected government’s overtures to be roped onto the DDE programme and have threatened legal action which could put the whole programme into jeopardy.
Already, the currency speculators are beginning to gain a head-start with regard to the country’s cedi. It has shown signs of picking up the pace again with regard to depreciation. At the turn of the year, the cedi was trading at GH¢7.9 to US$1. However, as of yesterday, it had reached over GH¢9 to the US$1 tumbling almost 20 per cent since December.
This evening, the government reached an agreement with individual bondholders to have a technical team to review its petition on the Domestic Debt Exchange Programme (DDEP).
At a closed door meeting with the leadership of the Individual Bondholders Forum, the Minister of Finance, Ken Ofori-Atta said the government was opened to discussing alternative means of making the DDEP successful.
The Ranking Member of Parliament’s Finance Committee, Dr Cassiel Ato Forson, has said that Ghana will face another financial sector collapse if the government goes through with its Domestic Debt Exchange Programme (DDEP).
According to him, the government, through its DDEP, is seeking to transfer its debt problem to individuals and private organisations including banks, which will lead to them not being able to pay their depositors and their eventual collapse.
Speaking in an interview on JoyNews on Monday, January 16, 2023, which was monitored by GhanaWeb, Ato Forson added that at least five banks are on the brink of collapse because of the economic challenges in the country.
“… at the end of the debt restructuring, the financial sector will have to collapse again. I am already seeing about five banks (that are) already going to shake because of what is going to happen to them if we allow it (the DDEP) to go (through).
“So, do we really want to transfer the burden where the state is insolvent to the private sector and what will be the repercussions going forward?” we quizzed.
Dr Ato Forson, the Member of Parliament for Ajumako Enyan Esiam, therefore urged the government to hold on to its DDEP and make the necessary consultations before going on with it.
“That is why we are saying that it is for you and I to sit down and jaw-jaw for us to find a proper mix to resolve (the current challenges),” he said.
He added that should the government decide to force the debt restructuring programme on Ghanaians, the entire middle class in the country will also be whipped out.
Meanwhile, the invitation to the Domestic Debt Exchange Programme has been extended for the third time to January 31, 2023.
This comes after the second extension by the Finance Ministry expired on January 16, 2023.
The decision to include individual bondholders was necessitated after the government was forced by labour unions to abandon plans to include pensions in the debt exchange programme which was first announced in December 2022.
In order to “secure internal approvals” from the financial sector,the Ministry of Finance on Monday extended the registration deadline for its domestic debt exchange to January 31, 2023.
Educationist and economist Professor Stephen Adei has recommended to the government that the threshold for pensioners who might be impacted by the ongoing domestic debt exchange programme be revised.
Adei contends that doing this will guarantee that those who are weak and have unstable finances are exempt from the programme.
In order to “secure internal approvals” from the financial industry, the Ministry of Finance on Monday extended the registration deadline for its domestic debt exchange to January 31, 2023.
Speaking to an Accra-based media house on Monday (16 January), Adei warned that the country risks losing some lives in the coming weeks if government fails to review the threshold for pensioners.
“The pensioners – my colleagues – it is because when we got our lump sum, our life investments, we invested it into government’s bonds, so that is what is now at stake…” he said.
“… There must be a threshold, so that, there is a certain minimum, other than that, some of my colleagues will physically die in a [few] weeks, so it is a very serious matter.”
Poor communication
The economist wants the government to step up efforts in educating Ghanaians on which category of persons are likely to be affected by the debt exchange programme.
“So much is being said without people understanding it, we are talking about young people like you who are yet to go for pension and have invested in the bonds for their future, communication has been terribly bad,” he said.
Exempt pensioners
Meanwhile, Professor Lord Mensah, an associate professor at the University of Ghana Business School, has advised the government to exempt pensioners from its Domestic Debt Exchange Programme.
Mensah argues that the quantum of bonds held bypensioners is insignificant, and so offering them an exemption is not only right but will not make a significant difference to the government’s attempts to raise revenue.
Speaking in an interview with Asaase radio, Mensah said: “I will prefer we exempt pensioners and the disabled, because usually these are people [of whom] you know very well that generating economic activities around themselves will be very low.
“So, I will plead with the government: I don’t think the quantum of bonds that they are holding within the entire debt structure will be so much,” he said. “I don’t think they will exceed GHC3 billion.”
Despite domestic economic commitments, he claims that Parliament was not given the fine details of the debt swap program, which is a component of the proposed debt restructuring plan by the International Monetary Fund (IMF).
“There were meetings before the budget came to be consummated and later on presented by the Finance Minister. So we had broad discussions, but the details were not known to us at the time, but some consultations went on as to where exactly we were as a nation. But I am not too sure that this matter came up for discussion maybe the broad strokes were mentioned but not the details,” Kyei-Mensah-Bonsu said speaking on Accra-based Citi FM.
As part of efforts to secure an IMF bailout and address the country’s unsustainable debt situation, government launched the DDEP inviting bondholders to voluntarily exchange approximately GH¢137 billion domestic notes and bonds of the Republic including ESLA and Daakye for a package of new bonds.
Private legal practitioner, Gabby Asare Otchere-Darko has advanced reasons for which individual bondholders are supposed to welcome the debt restructuring offer from the government.
According to him, the Ghanaian economy could crash if the bondholders do not quickly accept the offer as outlined by the Ministry of Finance.
Gabby, in a series of posts on social media, warned against the agitations surrounding the deal and encouraged the bondholders to play their role in the Domestic Debt Exchange Programme (DDEP).
“Ghana is in a very difficult place. What we are seeing with the mobilisation of agitation on individual bondholders poses a real and serious risk worse than what we witnessed when opposition to E-levy succeeded in derailing an already shaky macroeconomic situation from 2021,” portions of his tweets read.
“The debt exchange programme is voluntary for individual bondholders but a very necessary evil for our economy.
“Its success is critical to restoring macroeconomic stability, securing an IMF programme. It hits those of us holding bonds very hard. A straight no to it is no solution!”, Mr Otchere-Darko stressed.
“If the no-compromise opposition to it wins, what then has been achieved? It may lead to national debt default.
“So what then happens to the value of your bonds after! Potentially worthless. If participation is low, we jeopardize resolving the economic crisis and hardships”, he wrote.
Gabby Otchere-Darko concluded his tweet storm by reminding Ghanaians that the country’s economy is not in a good shape and that certain uncomfortable measures ought to be taken to restore it.
“I’m sorry but we have to face the hard/painful truths. We ain’t sitting pretty. Our focus must be on how the burden to individual bondholders may be possibly eased; but not to take the hardline position of simply saying no to participation. It will come back to hit us harder!”.
Meanwhile, the invitation to the Domestic Debt Exchange Programme (DDEP) expires today, Monday, January 16, 2023, at 4:00 p.m.
This comes after two extensions of the expiration date by the Finance Ministry.
The decision to include individual bondholders was necessitated after government was forced by labour unions to abandon plans to include pensions in the debt exchange programme which was first announced in December 2022.
Majority Leader Osei Kyei Mensah Bonsu warns that involving bondholders without further consultations could wipe out the middle class and will spell doom for the country.
“What we talking about is that many of these bondholders also belong to the middle class and that’s where the major worry is.
“If we are wiping away the middle class that could be dangerous, so we need to have some further dialogue on this. I’m not sure government takes interest and joy in suppressing anyone no government will have any joy in doing that.
“So government thinks that this is the best way forward, however even if it is, we need to engage, reflect and then move on and that will encourage some people who have some doubt to better appreciate where we are.”
This was his response to a group of individual bondholders led by convener, Senyo Hosi and private legal practitioner Martin Kpebu when they presented a petition to him and the ranking member of Parliament’s Finance Committee, Cassiel Ato Forson in Parliament House on Friday, to convey their grievances to the Executive.
Major stakeholders including economists have urged government to halt the plan and exempt them from signing on to the restructuring deal which expires on Monday.
But government says the aim of the program is to make the nation’s debts sustainable as a key component of securing an IMF deal.
Ranking on the Finance Committee, Cassiel Ato Forson disagrees that government must proceed with individual bondholders.
In the meeting with the individual bondholders, he called on the Finance Minister to immediately halt their inclusion for further consultations.
In the interim, bondholders wait with bated breath on the next step government will take.
But in all this, the Majority Leader fears progressing without caution would not only terminate the middle class but destroy the savings culture of the citizenry which has taken decades of painstaking work to build.
“Nothing can substitute for discussions, round table discussions and engagements wherever we find ourselves in. I think it’s important that we go back to the drawing table to have engagements with the major stakeholders.
“As he said, all of us are in it. And if we don’t manage well, we’ve gone through this before, way back some 25, 30 years ago and repositioning was a major, major difficulty.
“Today many people are coming on board and if this thing should happen, how do we build confidence and trust and reconstruct a new savings culture?” he said.
The bondholders provided the President with a petition in response to his declaration that there will be no haircuts on investments in his speech on December 5, 2022.
The President advised ignoring and discarding any reports of haircuts. However, the government subsequently declared that a restructuring is required due to its significant indebtedness.
They said: “But today, our coupons face absolute haircuts and when we discount your proposed benchmark bonds at the coupon rates of the original bonds, we are losing effectively 50% of our investments. When discounted at current T-bill rates, we are losing 71% of our investments, and at prevailing inflation, we face an 88.2% loss.”
This they noted was a complete deviation from what was promised by the government.
The statement however said “nothing was missing, small or great. I say to you, nothing will be lost, nothing will be missing, and nothing will be broken. We will, together, recover all” as quoted by the President has now become “Great will be lost, too much is missing, everything is broken, you will not recover, your livelihoods shall be destroyed.”
The bondholders in their petition want the government to exclude all individual bondholders of all types of government bonds from the domestic debt exchange programme.
They explained that individual bondholders are not a critical factor in the success of the programme.
“In our estimation, the direct individual bondholding and holdings through collective investment schemes stand at about GHS15.5bn, representing about 11% of the eligible bonds and the capitalized interest. With your set target of 80% of eligible bonds, Individual Bondholders are not a critical success factor to the viability of the DDE programme as you envisage, yet the impact of their inclusion has incalculable consequences. Please exclude us and save 1.3mn livelihoods and dependents from shackled penury,” they said.
The forum led by Senyo Hosi and David Tetteh pleaded with the President to ensure that it is “not said ever that during your tenure, your policies impoverished citizens whose primary duty to country was service and love through hard work and taxes. Your DDE as proposed for Individual Bondholders takes away our liberty to self-sustain, mocks hard work, and robs us of legally acquired property. None of these reflect the tenets of good governance.”
More than 10,000 bondholders have joined a campaign to oppose the contentious debt exchange.
The petitioners have pleaded with parliament to intervene and protect the 1.3 million individual bondholders in Ghana who were taken advantage of during the domestic debt exchange programme.
The petition states in part: “We are unaware of any direct or indirect parliamentary permissions that the DDE managers have received to make choices about financial arrangements that were once covered by legally enforceable contracts. If that were the case, your office would have referred to the concepts of a fair and impartial hearing for all parties, in this example, the assignee of the DDE programme and the Individual Bondholders, to support their claims. It should be noted that other governments that have ever dealt with creditors in a domestic debt exchange scheme have used this as their fundamental strategy. Due to their really representative nature, parliaments will not only take into account the general national interest, no matter how tenuous, but also ensure that citizens are protected from the executive’s arbitrary actions.
“The Parliament of Ghana may have been liberal when it comes to approving expansionary national budgets even in the face of austerity. However, we are also aware that it does not take kindly to being sidestepped by the executive especially when it senses evasion of accountability. Sirs, let it not be said ever that during your leadership, you looked on when your constituents whose primary duty to country was service and love through hard work and taxes were impoverished by executive fiat. Your constituents should never ever be afraid of their representatives. Save them.
“Finally, we wish to state that within our group are persons who possess technical and policy skills and are willing to assist government explore viable options without catastrophically impairing the interest of Individual Bondholders.”
This is because the programme has left investors short of options, which explains why the most recent auction of money market instruments was oversubscribed -dominated by the 91-day and 182-day tenors – by 15.5 percent in the first week of the year. In all, total demand worth GH¢1.72billion was tabled against the Treasury’s target of GH¢1.49billion.
The issuer accepted 97 percent of the tendered bids, which coincided with a hike in yield of the 91-day instrument by 14bps – from 35.36 percent to 35.66 percent. The 182-day bill also recorded a modest 3bps increase, to 35.98 percent from 35.95 percent.
“Given the limited options for pension and other institutional funds, the offer could be oversubscribed at a slightly higher cost,” Economist and Research Lead at GCB Capital, Courage Kwesi Boti, stated.
Recent interest rates on the 91-day and 182-day instruments show a hike of 23.14 percent for the former and 22.78 for the latter during the same period a year ago. At the time, the shortest tenor bill rate was 12.52 percent while that of the 6-month security was 13.19 percent.
DDEP
Despite an amendment to terms of the voluntary DDEP – which government hopes will help it save as much as GH¢31.29billion in interest payments during 2023 – to exempt pension funds but now include individual bondholders, government has continued to keep T-bills out of the programme since they remain a critical tool for its short-term financing.
There are, however, growing concerns that push-back by the investing public against terms of the DDEP – coupled with the rising short-term rates which have been described as prohibitive – will increase pressure on the state.
Already, a group calling itself Individual Bondholders’ Forum (IBF) has called on its members – particularly direct, individual bondholders – to “reject and refrain from complying with the mandatory deadline imposed under the debt exchange programme”.
The group also urged investors to direct their fund managers not to accept the DDEP.
The deadline for voluntary participation in the Debt Exchange Program had been moved up by the government from December 30, 2022, to January 16, 2023. The Exchange is a program for renegotiating government debt. It should be mentioned that the government has experienced a severe economic crisis marked by elevated interest rates, skyrocketing inflation, a record-breaking devaluation of the cedi, and numerous downgrades of the economy’s credit rating.
This programme was introduced with the expectation that it would significantly reduce the burden of interest payments on the Ghanaian government and save approximately US$1.2 billion in interest between 2023 and 2028, or 7% to 8% of the country’s GDP.
If the debt exchange is successful, the government of Ghana will gain significant fiscal space, while local bondholders will suffer significant losses on their investment in government domestic bonds and notes.
• Offering accrued and unpaid interest on Eligible Bonds, and a cash tender fee payment to holders of Eligible Bonds maturing in 2023;
• Increasing the New Bonds offered by adding eight new instruments to the composition of the New Bonds, for a total of 12 New Bonds, one maturing each year starting January 2027 and ending January 2038;
• Modifying the Exchange Consideration Ratios for each New Bond. The Exchange Consideration Ratio applicable to Eligible Bonds maturing in 2023 will be different from other Eligible Bonds;
• Setting a non-binding target minimum level of overall participation of 80% of the aggregate principal amount outstanding of Eligible Bonds; and
• Expanding the type of investors that can participate in the Exchange to now include Individual Investors.
Impact on Individual Investors
The investing community, the most average Ghanaian, has raised concerns upon hearing this news of restructuring debts owed them by Government. Many people have imitated that this news will worsen their living conditions because they use these coupon payments to pay for expenses such as daily living cost, rent, school fees and a host of others.
Again, a good number of investors in government bonds are pensioners who have invested their pension payouts as a way to receive a periodic stream of income whilst on retirement. Others who require their investment for any profitable project will be impacted as well, as they will be unable to do so at this time.
Holders of bonds maturing in 2023 will receive coupons starting from 2027 to 2033, while those with bonds maturing in 2024 will receive coupons starting from 2027 to 2038.
Imagine a 62-year-old pensioner who owns a Government of Ghana (GOG) bond and will receive its full principal in 12 years. My question is, what happens to this pensioner if he or she dies before the 12-year period is up? This is the reality for many Ghanaians who have purchased GOG bonds. Many of these bondholders will suffer from depression and die prematurely as a result of this situation.
Impact on businesses
Companies that purchased bonds to fund future business expansion with principal payments will be unable to do so from now (2023) until 2027 because they will not be paid (except coupon payments) according to the terms of their bond. As a result, businesses will miss out on much-needed capital injections to help them expand.
This is likely to have an impact on productivity and, to a greater extent, lead to staff layoffs, because if a company is unable to meet its economic obligations or perform at its usual optimal level, the easiest way out is layoffs.
Impact on financial institutions
The financial sector, which includes stakeholders such as local banks, would be greatly impacted by the implementation of this domestic debt exchange, owing to excessive exposure to government-issued bonds. Bank capital reserves would be severely depleted, resulting in liquidity shortages and, in the long run, financial instability in the economy.
The depreciation of their restructured assets, such as government bonds, may cause the asset side of banks’ balance sheets to suffer a direct hit. On the liability side, banks may face deposit withdrawals and the interruption of interbank credit lines. These issues may jeopardize their ability to mobilize resources.
Way forward
The government needs to be more transparent about the bondholders’ choices if they choose not to accept the DDE. As it stands, the exchange document is not clear on what happens if a bondholder refuses the exchange.
The government should also give bondholders an opportunity to discuss and bargain the offered terms since, in my opinion, doing so will result in a fair resolution moving forward.
Also, government needs to assume more burden in resolving the current economic situation. The just-passed budget still has line items that can be shelved for now to create fiscal space to either continue paying investors their coupons and principals, or reduce the impact of the exchange program with favourable terms.
Additionally, I advise the government to immediately halt the Domestic Debt Exchange Programme and promote greater stakeholder involvement.
IMANI Africa’s Franklin Cudjoe has urged the government to once again extend the deadline for the domestic debt exchange programme to allow for negotiations.
According to him, it will be in the best interest of the government to do so as it will afford them the opportunity to fully get bondholders on board the programme.
Individual bondholders have put up a strong resistance against the debt programme citing among other things the government’s failure to include them in engagements as well as the lopsided positioning of the deal which they say offloads a significant chunk of the burden on them.
Some have since accused the government and local banks of using subtle coercion to get them to sign the deal.
Addressing the issue on JoyNews’ PM Express, Franklin Cudjoe said, “The question really is, why are we using shadow boxing, subterfuge in order to coerce people, to sign onto something that is supposed to be contractual, really? I mean if it was in good faith you wouldn’t have to use subterfuge.
“I suspect what should be done immediately…I think this deadline of 16th or 17th must be extended, and a proper discussion, a proper negotiation terms handed down by the Ministry of Finance. I don’t even know whether they’re getting overwhelmed by the work itself. It looks to me that they’re very confused.”
“I don’t think they’ll be saving face if they decided to extend the time actually. I think it will be in their best interest to extend the time and cover up the bases properly. And I will submit to people who have been coerced or who are called upon to sign onto something they know very well is not in good faith to desist from doing so,” he added.
He has called on all individual bondholders, including those being coerced to sign onto the deal to join the Individual Bondholders Forum.
The Individual Bondholders Forum was created to pushback against the government’s debt programme and force government to come to the table with a better offer than it is currently proposing.
“If they’ll do that they probably should come under the IBF or any other entity that is calling on people for some mass action. But that is the only language I suspect will be understood at this juncture. Otherwise they’ll be on their own really,” he said.
Prof Mensah also an Honorary Fellow at Solidaire Ghana believes that, since the bank and non-bank sector stability plays a major role in a non-market economy like Ghana, the government is advised to stress-test all these sectors before any debt exchange program.
The economist explained that, the stress test will provide information on how to design the needed support for the sector. Indicating further that, the financial stability support fund provided in the first and the revised DDEP is not enough, some of the institutions may need recapitalization, liquidity support, and in large regulatory measures.
Prof Mensah stressed that, “There seems to be no appreciation of the consequence of the entire DDEP on the domestic financial sector.”
Consequently, he provided education on the effect between the DDEP and the financial sector. “The government should note that Banks and the Non-Bank (including pensions, rural banks, and insurance companies) sectors hold more than 84% of the domestic debt, and as a result, careless execution of the DDEP may spread the country’s debt distress to other parts of the economy, with likely effects on the financial stability and economic activity.
“The structure of the DDEP will play a major role in achieving the necessary fiscal space whiles minimizing the risk to the domestic financial system and the broader economy. The government must sacrifice and cast its net wide to ensure borrower-creditor participation in the DDEP by lowering the relief it is seeking from the creditors.”
Meanwhile, moving from the above analysis on the DDEP, the economist expects the “macroeconomic indicators like the exchange rate (Cedis to the Dollar) and inflation to see some stability compared to last year, due to the fall in global oil prices and other policies.
“The fall in global oil prices, the suspension of external debt payments by the government, and the possible IMF extended credit facility will have the potential to control the exchange rate.
“The control of the exchange rate will build up into a reduction in inflation since the greater part of the Ghanaian inflation is imported.”
According to them, their regular source of income has already been impacted by inflation thereby putting more financial constraints on pensioners who often rely on pension funds to pay their medical bills, regular medications and critical expenses.
“Most of us have made these investments with the expectation that the coupons will supplement the meagre pensions we receive through Tier One Pensions under the Social Security and National Insurance Trust (SSNIT),” the group stressed.
“We have greater motivation to invest in these securities for both safety and liquidity considerations. Our coupons have become our core income while waiting for the payment of the principal amount upon maturity,” the lead convener added.
They added that given the Amended and Restated Exchange Memorandum terms of the DDEP which extends to 15 years, many pensioners who are equally vulnerable in society, will not live enough to receive our investment in these government securities.
The group has therefore petitioned the Minister of Finance and the Presidency and also appealed to government to exempt pensioners who hold government bonds from the Domestic Debt Exchange Programme.
Total market turnover on the bond market increased by 150.30% to ¢1.17 billion during the week under review as more bond transfers were recorded.
The bond transfers are said to be in preparation for the Domestic Debt Exchange programme.
Fund managers in recent times have been moving funds from one account to another as investors consider the Domestic Debt Exchange programme.
According to market data, bond market activity was mainly concentrated in the lower yield curve with a trade concentration of 41%.
August 27, 2022, November 26, 2022 and January 3, 2023, saw more activity with total volumes of ¢112.32 million, ¢255.35 million and ¢191.75 million respectively.
Analysts believe the secondary market will remain quiet as investors decide on participating in the domestic debt exchange.
Corporate bonds will, however, continue to attract demand, but with very little selling interest and continued demand for Treasury bills.
Meanwhile, a 3-year at a yield of 28.50% will mature in March 2023.
The IMF resident representative stated in an interview with Graphic Online that Ghana’s administration seeks to increase budgetary transparency, better management of public companies, and address structural difficulties, particularly in the energy and cocoa industries.
As part of measures to address exchange rate challenges and monetary policies, the IMF representative said the Bank of Ghana would continue to strengthen its monetary policy framework and promote exchange rate flexibility to rebuild external buffers.
He further added that reducing inflation, enhancing resilience to external shocks and improving market confidence will be prioritized as part of Ghana IMF’s programme.
“As part of the authorities’ debt strategy, a domestic debt exchange has been launched. The authorities are committed to taking the necessary mitigation measures to ensure financial sector stability is preserved. We will be able to share more details publicly once the programme has been approved by our board, followed by the publication of the related documents,” he disclosed.
Dr Leandro Medina was appointed in September 2022 to assume responsibility as IMF resident representative for Ghana. He took over from Dr Albert Touma Mama following the end of his mission.
Ghana on December 13, 2022 secured a Staff-Level Agreement with the fund for an amount of $3 billion under an Extended Credit Facility. As part of the deal, government has announced plans to undertake a Domestic Debt Exchange Programme.
Under the programme, government is inviting domestic bondholders to voluntarily swap their bonds for fresh ones. It is targeting approximately GH¢137.3 billion of principal amount, outstanding of certain domestic notes and bonds issued by the government.
Addressing the country’s debt burden, government on Monday, December 5, 2022 launched the Domestic Debt Exchange programme aimed at restructuring the country’s domestic debt to ensure sustainability. This programme is particularly relevant in the context of Ghana’s current economic challenges, including elevated inflation and interest rates, as well as a weakening cedi and recent multiple credit rating downgrades on the back of a deteriorating economic situation.
This programme, as indicated by government, is meant to alleviate the debt burden in a most transparent, efficient and expedited manner, which would minimise impacts from the domestic debt exchange policy on investors holding government bonds.
Overall, government’s policy for investors in this domestic debt exchange programme appears to be focused on minimising the impact on individual bondholders and assuring them that their investments will not be affected. Government states that it will not implement a principal haircut on eligible bonds, and that Treasury bills will be completely exempted from the exchange programme. Individual bondholders will not be affected, and will be able to exchange their existing bonds for new ones with longer maturities and stepped-up interest rates.
Government also emphasises that this domestic debt exchange programme is part of a broader agenda to restore debt and financial sustainability, and that it is working toward a restructuring of its external indebtedness. It is also seeking support from the International Monetary Fund.
Leading Indicators
Inflation in Ghana has been on the rise in recent months, reaching an annual rate of 50.3% in November 2022. This has put pressure on the country’s central bank to raise interest rates to curb inflation. The monetary policy committee (MPC) of the Bank of Ghana (BoG) concluded its last MPC meetings of the year in November 2022 by raising the benchmark interest rate another 250bps to 27.0% – continuing its fight against surging inflation and re-anchoring inflation expectations. This brings full-year rate increases to a historic 1,250bps (12.50%) in 2022.
A higher benchmark rate is targetted at reducing demand for goods and services, thus slowing the rate of inflation. However, this can also have negative consequences for the financial market as higher interest rates can make it more difficult for businesses to access credit, which could in turn slow economic growth and job creation.
Headline inflation is expected to peak in Q1-2023 and settle around 25% at end of Q3-2023 in their baseline scenario. However, implementation of the 2.5% increment in VAT and the pass-through effects of exchange rate losses remain significant risks.
The cedi, Ghana’s currency, has also been struggling in recent months – depreciating against the dollar and other major currencies. The cedi lost 0.73 against the greenback on the BoG’s interbank market in Nov 2022. Cumulatively, the local currency has depreciated by some 52% this year, rendering imported goods more expensive and reducing the purchasing power of businesses. This has also made it more difficult for government to repay its foreign debt, as it must use more cedis to buy the same amount of dollars or other foreign currencies.
Per 2023 budget, the Public Debt-to-GDP ratio stood at 75.9 percent at the end of September 2022; largely reflecting the impact of currency depreciation. The external debt as a percentage of total debt stock was 58.1 percent as at end of September 2022, up from the 48.4 percent recorded in 2021. The sharp growth in external debt stock was largely on account of the local currency’s sharp depreciation. The Ghana cedi’s depreciation added GH¢93.86billion to the external debt stock compared to the transaction effect of GH¢7.55billion.
Overall, the rate of debt accumulation increased from 20.7 percent at end-December 2021 to 32.7 percent for end-September 2022; reflecting the impact from depreciation of the Ghana cedi on external debt.
Impact on the financial market
Against this backdrop, the Domestic Debt Exchange programme can be seen as a potentially positive development for the financial market in Ghana. By swapping high-interest domestic bonds with lower-interest ones, the programme can save government millions of dollars in interest payments, which could be used to help boost the economy and address other challenges such as inflation and the depreciating cedi.
However, the DDE programme could also have negative consequences for the financial market which might be complex and very much uncertain. While it has potential to improve the country’s fiscal health and reduce the debt burden, it could also lead to increased volatility in the market.
The proposed interest rate being offered in this domestic debt exchange programme is 10% per year, with a stepped-up schedule starting at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. This proposed interest rate may have a number of impacts on investors.
Instructively, one potential impact of the DDE programme is on attractiveness of the new bonds compared to existing ones. Given that the current interest rate on existing bonds hovers around 38.82% for the 2-yr note and 48.71 % for the 20-yr bond, the proposed interest rate of 10% per year may be seen as less attractive to investors.
The debt restructuring programme’s details further dampened investor-sentiment and sent investors into a quandary, as there could be a potential loss on their investment in the long-term. Signals from the secondary market as of Friday, December 9, 2022 showed selling interest remained elevated while buying interest was elusive. Trading activities hovered around the medium- to long-term papers. At the far end of the curve, Jul-2033 (Coupon of 11.65%) was actively traded and settled at 40.50%, while Nov-2026 (Coupon of 19.00%) at the belly of the curve cleared at 39.03%.
The market very much expects yields to continue their upward trajectory as participants offload their holdings to reduce exposure amid elevated risk due to the proposed debt exchange programme.
In the context of Ghana’s current economic challenges – including elevated inflation, a depreciating cedi and interest rate increases – it will be important to closely monitor effects of the DDE programme and make any necessary adjustments to ensure its success.
It is worth noting that the exchange programme is not the only measure being taken by the government of Ghana to address the country’s economic challenges. For example, government has also implemented measures to increase revenue and reduce spending, such as increasing taxes and cutting subsidies.
Additionally, government has been working with international organisations such as the International Monetary Fund (IMF) to obtain financial assistance and support as the staff level agreement (SLA) has been achieved in record time, marking a significant milestone in Ghana’s quest for policy support for its post-COVID-19 economic recovery efforts.
Disputes over the proposed DDE programme
Despite any possible success the domestic debt exchange programme could make, it has faced opposition from some groups within the financial sector and the public at large. These groups have argued that the programme is not sustainable in the long-term, and that it exposes investors to significant risks.
One of the main concerns raised by opponents of the programme is lower interest rates on the new instruments being offered as part of the exchange. These lower rates may not be sufficient to compensate investors for the risks associated with holding Ghanaian debt, and may make the new instruments less attractive to investors. This could limit the programme’s overall success, and hence make it more difficult for government to attract investors’ participation.
Another concern raised by opponents of the programme is its potential impact on the country’s credit rating. The programme will successfully reduce the overall cost of Ghana’s domestic debt, but has led to further a downgrade of the country’s credit rating since it was first announced. This could make it more difficult and expensive for government to borrow in the future, and could have negative consequences for the country’s economy.
Despite these concerns, government remains committed to the domestic debt exchange programme and continues to believe it is a necessary and effective tool for addressing the country’s economic challenges. The programme has been adjudged appropriate for reducing overall cost of the country’s domestic debt, and improving investor confidence and liquidity in the domestic debt market.
This, when fully completed, will afford government some fiscal space to operate – as it envisages reducing, particularly, the domestic interest cost in 2023; which is estimated at GH¢31.29billion out of the total GH¢52.55billion.
These could lay the foundation for a more sustainable financial market in Ghana, and also contribute to overall stability of the country’s economy.
Addressing the Investors’ Concerns
Government can take steps to address concerns about the programme’s potential impact on the country’s credit rating. These could include implementing policies that improve overall sustainability of the country’s debt and reduce the risks associated with holding Ghanaian debt. By taking such steps, government could help convince the financial sector that the domestic debt exchange programme is a worthwhile investment and can help attract more investors.
Overall, Ghana’s government will need to take a proactive approach to address the concerns raised by opponents of the domestic debt exchange programme. By implementing policies that increase the attractiveness of new instruments being offered as part of the exchange, and which provide investors with greater confidence in the programme’s long-term sustainability, government can convince the financial sector to join the programme and support the country’s economic growth and development.
What’s next?
In conclusion, the Domestic Debt Exchange programme is a significant initiative that has potential to improve the country’s fiscal health and reduce its debt burden. The proposed interest rate may have an impact on the overall level of interest rates in the economy. If government is successful in attracting a large number of investors to participate in the exchange programme and the new bonds are widely held, this could lead to an increase in overall supply of government bonds in the market.
This, in turn, could put downward pressure on interest rates more broadly, as the increased supply of bonds may lead to a decline in their prices and a corresponding increase in their yields. On the other hand, if government is unable to attract sufficient investor interest in the new bonds, this could lead to a decline in the supply of government bonds – which could put upward pressure on interest rates.
However, it is important to carefully monitor its implementation and effects and take any necessary steps to ensure its success. By working together, government, the financial market and other stakeholders can help to support the stability and growth of Ghana’s economy.
It is also worth noting that success for the DDE programme will not depend only on the actions of government and the financial market. The broader economic environment will also play a role in determining the programme’s success. For example, factors such as global economic conditions and commodity prices could impact Ghana’s economy, and in turn effectiveness of the DDE programme.
Furthermore, the DDE programme’s success will also depend on the willingness and ability of Ghanaians to support and participate in it. For example, individual investors and institutions holding domestic bonds will need to willingly exchange their bonds for new ones with different terms for the programme to achieve its goals.
To support the DDE programme’s success, it will be important for government to communicate clearly and transparently with the public about the programme and its benefits. By providing clear and accurate information, government can help build trust and support among the public – which will be essential for the programme’s success.
Executive Secretary, Civil and Local Government Staff Association (CLOGSAS),Isaac Bampo Addo, says the appointment of political apparatchiks to positions in Civil and Local Government Services is the cause of policy failures.
“Political apparatchiks and ‘goro’ boys have been made to take positions in Civil and Local Government Services, and this has impacted negatively on the fortunes of government, necessitating Domestic Debt Exchange Programme (DDEP).” Mr Bampo made this observation when he delivered a Christmas message at the CLOGSAG end of year thanksgiving service.
He said the Civil and Local Government Services were both at the heart of local and central governance and that if any part of government machinery was corrupted, it would affect the whole system, noting that, “most of these apparatchiks have exhibited political party loyalty, as against neutrality, professionalism, efficiency and integrity requires by both Services.”
The Executive Secretary noted that the way the domestic debt exchange was handled had raised pertinent issues and concerns, which should not be left unattended to.
“Some issues, including the possibility that some corporate trustees had prior knowledge of the DDEP and were able to convert their domestic bond holdings into either foreign assets or foreign currency, changed their corporate holding into individual holding and changed their bond holdings into cash are issues for interrogation.”
According to Mr Bampo, government chose DDEP as an answer to its inability to service the domestic debt liability when it could have curtailed its flagship programmes that would have gone a long way to exhibit willingness on the part of government to live within its means.’
“We have noted that government has exempted pensions funds from the DDEP, however, if government should fail to honour any of our coupons, when due, CLOGSAG will embark on an indefinite nationwide strike.”
He urged the members to be calm and go about their normal duties with diligence and called on the National Pensions Regulatory Authority (NPRA) to investigate the issues raised.
On Monday, December 5, 2022, the government announced the commencement of the domestic debt exchanage program, which aims to restructure the nation’s domestic debt to assure sustainability.
This program is especially pertinent given Ghana’s present economic difficulties, which include high inflation and interest rates, a declining cedi, and recent multiple credit rating downgrades as a result of a worsening economic climate.
Overall, government’s policy for investors in this domestic debt exchange programme appears to be focused on minimising the impact on individual bondholders and assuring them that their investments will not be affected.
Government states that it will not implement a principal haircut on eligible bonds and that Treasury bills will be completely exempted from the exchange programme. Individual bondholders will not be affected and will be able to exchange their existing bonds for new ones with longer maturities and stepped-up interest rates.
Government also emphasises that this domestic debt exchange programme is part of a broader agenda to restore debt and financial sustainability, and that it is working toward a restructuring of its external indebtedness. It is also seeking support from the International Monetary Fund.
Leading Indicators
Inflation in Ghana has been on the rise in recent months, reaching an annual rate of 50.3% in November 2022. This has put pressure on the country’s central bank to raise interest rates to curb inflation.
The monetary policy committee (MPC) of the Bank of Ghana (BoG) concluded its last MPC meetings of the year in November 2022 by raising the benchmark interest rate another 250bps to 27.0% – continuing its fight against surging inflation and re-anchoring inflation expectations. This brings full-year rate increases to a historic 1,250bps (12.50%) in 2022.
A higher benchmark rate is targeted at reducing demand for goods and services, thus slowing the rate of inflation. However, this can also have negative consequences for the financial market as higher interest rates can make it more difficult for businesses to access credit, which could in turn slow economic growth and job creation.
Headline inflation is expected to peak in Q1-2023 and settle around 25% at end of Q3-2023 in their baseline scenario. However, implementation of the 2.5% increment in VAT and the pass-through effects of exchange rate losses remain significant risks.
The cedi, Ghana’s currency, has also been struggling in recent months – depreciating against the dollar and other major currencies. The cedi lost 0.73 against the greenback on the BoG’s interbank market in Nov 2022.
Cumulatively, the local currency has depreciated by some 52% this year, rendering imported goods more expensive and reducing the purchasing power of businesses. This has also made it more difficult for government to repay its foreign debt, as it must use more cedis to buy the same amount of dollars or other foreign currencies.
Per 2023 budget, the Public Debt-to-GDP ratio stood at 75.9 percent at the end of September 2022; largely reflecting the impact of currency depreciation. The external debt as a percentage of total debt stock was 58.1 percent as at end of September 2022, up from the 48.4 percent recorded in 2021.
The sharp growth in external debt stock was largely on account of the local currency’s sharp depreciation. The Ghana cedi’s depreciation added GH¢93.86billion to the external debt stock compared to the transaction effect of GH¢7.55billion.
Overall, the rate of debt accumulation increased from 20.7 percent at end-December 2021 to 32.7 percent for end-September 2022; reflecting the impact from depreciation of the Ghana cedi on external debt.
Impact on the financial market
Against this backdrop, the Domestic Debt Exchange programme can be seen as a potentially positive development for the financial market in Ghana. By swapping high-interest domestic bonds with lower-interest ones, the programme can save government millions of dollars in interest payments, which could be used to help boost the economy and address other challenges such as inflation and the depreciating cedi.
However, the DDE programme could also have negative consequences for the financial market which might be complex and very much uncertain. While it has potential to improve the country’s fiscal health and reduce the debt burden, it could also lead to increased volatility in the market.
The proposed interest rate being offered in this domestic debt exchange programme is 10% per year, with a stepped-up schedule starting at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. This proposed interest rate may have a number of impacts on investors.
Instructively, one potential impact of the DDE programme is on attractiveness of the new bonds compared to existing ones. Given that the current interest rate on existing bonds hovers around 38.82% for the 2-yr note and 48.71 % for the 20-yr bond, the proposed interest rate of 10% per year may be seen as less attractive to investors.
The debt restructuring programme’s details further dampened investor sentiment and sent investors into a quandary, as there could be a potential loss on their investment in the long term. Signals from the secondary market as of Friday, December 9, 2022 showed selling interest remained elevated while buying interest was elusive.
Trading activities hovered around the medium- to long-term papers. At the far end of the curve, Jul-2033 (Coupon of 11.65%) was actively traded and settled at 40.50%, while Nov-2026 (Coupon of 19.00%) at the belly of the curve cleared at 39.03%.
The market very much expects yields to continue their upward trajectory as participants offload their holdings to reduce exposure amid elevated risk due to the proposed debt exchange programme.
In the context of Ghana’s current economic challenges – including elevated inflation, a depreciating cedi and interest rate increases – it will be important to closely monitor the effects of the DDE programme and make any necessary adjustments to ensure its success.
It is worth noting that the exchange programme is not the only measure being taken by the government of Ghana to address the country’s economic challenges. For example, government has also implemented measures to increase revenue and reduce spending, such as increasing taxes and cutting subsidies.
Additionally, government has been working with international organisations such as the International Monetary Fund (IMF) to obtain financial assistance and support as the staff level agreement (SLA) has been achieved in record time, marking a significant milestone in Ghana’s quest for policy support for its post-COVID-19 economic recovery efforts.
Disputes over the proposed DDE programme
Despite any possible success the domestic debt exchange programme could make, it has faced opposition from some groups within the financial sector and the public at large. These groups have argued that the programme is not sustainable in the long-term, and that it exposes investors to significant risks.
One of the main concerns raised by opponents of the programme is lower interest rates on the new instruments being offered as part of the exchange. These lower rates may not be sufficient to compensate investors for the risks associated with holding Ghanaian debt and may make the new instruments less attractive to investors. This could limit the programme’s overall success, and hence make it more difficult for government to attract investors’ participation.
Another concern raised by opponents of the programme is its potential impact on the country’s credit rating. The programme will successfully reduce the overall cost of Ghana’s domestic debt, but has led to further a downgrade of the country’s credit rating since it was first announced. This could make it more difficult and expensive for government to borrow in the future and could have negative consequences for the country’s economy.
Despite these concerns, government remains committed to the domestic debt exchange programme and continues to believe it is a necessary and effective tool for addressing the country’s economic challenges.
The programme has been adjudged appropriate for reducing overall cost of the country’s domestic debt, and improving investor confidence and liquidity in the domestic debt market. This, when fully completed, will afford government some fiscal space to operate – as it envisages reducing, particularly, the domestic interest cost in 2023; which is estimated at GH¢31.29billion out of the total GH¢52.55billion.
These could lay the foundation for a more sustainable financial market in Ghana, and also contribute to overall stability of the country’s economy.
Addressing investors’ concerns
Government can take steps to address concerns about the programme’s potential impact on the country’s credit rating. These could include implementing policies that improve overall sustainability of the country’s debt and reduce the risks associated with holding Ghanaian debt. By taking such steps, government could help convince the financial sector that the domestic debt exchange programme is a worthwhile investment and can help attract more investors.
Overall, Ghana’s government will need to take a proactive approach to address the concerns raised by opponents of the domestic debt exchange programme. By implementing policies that increase the attractiveness of new instruments being offered as part of the exchange, and which provide investors with greater confidence in the programme’s long-term sustainability, government can convince the financial sector to join the programme and support the country’s economic growth and development.
What’s next?
In conclusion, the Domestic Debt Exchange programme is a significant initiative that has potential to improve the country’s fiscal health and reduce its debt burden. The proposed interest rate may have an impact on the overall level of interest rates in the economy.
If government is successful in attracting a large number of investors to participate in the exchange programme and the new bonds are widely held, this could lead to an increase in overall supply of government bonds in the market. This, in turn, could put downward pressure on interest rates more broadly, as the increased supply of bonds may lead to a decline in their prices and a corresponding increase in their yields.
On the other hand, if government is unable to attract sufficient investor interest in the new bonds, this could lead to a decline in the supply of government bonds – which could put upward pressure on interest rates.
However, it is important to carefully monitor its implementation and effects and take any necessary steps to ensure its success. By working together, government, the financial market and other stakeholders can help to support the stability and growth of Ghana’s economy.
It is also worth noting that success for the DDE programme will not depend only on the actions of government and the financial market. The broader economic environment will also play a role in determining the programme’s success. For example, factors such as global economic conditions and commodity prices could impact Ghana’s economy, and in turn effectiveness of the DDE programme.
Furthermore, the DDE programme’s success will also depend on the willingness and ability of Ghanaians to support and participate in it. For example, individual investors and institutions holding domestic bonds will need to willingly exchange their bonds for new ones with different terms for the programme to achieve its goals.
To support the DDE programme’s success, it will be important for government to communicate clearly and transparently with the public about the programme and its benefits. By providing clear and accurate information, government can help build trust and support among the public – which will be essential for the programme’s success.
The conference was scheduled to take place at the Ministry of Finance on Tuesday, December 13, 2022, starting at 10 am, according to the press announcement.
GhanaWeb sources have intimated that the three parties are prepared to reveal a specific resolution following months of negotiations as the government looks for a bailout, despite the fact that virtually little more was divulged regarding the matter to be discussed.
According to our sources, the IMF delegation visiting Ghana is anticipated to declare that it has secured a staff-level agreement with the government of Ghana for a FUND program.
The sources, stressed that as at yesterday, there remained some critical issues that needed to be “ironed out” before today’s formal announcement.
Government recently announced a Domestic Debt Exchange programme, which is laregly aimed at stabilizing the economy. The move which constitutes a domestic debt default status is seen by experts as part of conditionalities to access the FUND support.
What is a Staff-Level Agreement?
According to Ghanabusiness.com, a Staff-Level Agreement is reached between a country requesting for Fund and the IMF Mission subject to the approval of the IMF Management and Executive Board and receipt of the necessary financing assurances before loans are granted.
The IMF expatiates further on modalities from the agreement through to eventual approval of the agreement.
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country.
The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.
Ghana’s economic headwinds:
The economy is facing major headwinds that have been characterized by galloping inflation, consistent depreciation of the cedi and general high cost of living and of doing business.
The government is hoping to reach a deal with the IMF for an economic support programme aimed at shoring up the economy and easing the burden on ordinary Ghanaians.
President Akufo-Addo and his government have come under heavy scrutiny for failing to address the current economic challenges in the country.
The prices of goods and services have been continuously rising all year round, with inflation currently at over 40 per cent.
The Ghana cedi has been ranked the worst currency in the world among 148 currencies tracked by Bloomberg, overtaking Sri Lanka’s rupee, having depreciated by nearly 50 per cent so far in 2022.
Treasury bills and individual bond holders will not be subject to investment haircuts, according to the government, as the nation intends to implement a domestic debt exchange program.
Ken Ofori-Atta indicated that domestic bond holders will be required to swap their securities for new ones under the program in a video message published on December 4, 2022.
He also said there will no haircuts on the principal bonds of investors under the domestic debt restructuring programme.
“Existing domestic bonds as of December 1, 2022, will be exchanged for a set of four new bonds maturing in 2017, 2029, 2032 and 2037,” he noted.
“The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% in 2025 until maturity. Coupon payments will be semi-annual,” Ken Ofori-Atta explained.
The Finance Minister in the 4-minute address said the move was in line with government’s Debt Sustainability Analysis as contained in the 2023 budget he presented to Parliament on November 24.
Ken Ofori-Atta outlines Domestic Debt Exchange programme
