Govt rolls out Domestic Debt Exchange Programme …as Finance Minister appeals for support from Ghanaians

The government has formally launched Ghana’s Domestic Exchange Programme as part of measures to restructure and bring the country’s debt portfolio to sustainable levels, with a call on Ghanaians to support the rollout.

The programme, which commences from 2023 to 2037, would see government exchange existing domestic bonds for a set of four new ones maturing in 2027, 2029, 2032 and 2037.

As part of the exchange, the annual coupon on all of the coupons would be set at zero per cent in 2023, five per cent in 2024 and ten per cent in 2025 until maturity.

• Mr Ofori-Atta (inset) speaking at the programme
• Mr Ofori-Atta (inset) speaking at the programme

Speaking at the launch attended by heads of the various regulatory authorities of the banking and financial sector, the Minister of Finance, Mr Ken Ofori-Atta, said holders of domestic instruments were being invited to voluntarily exchange approximately GH¢137 billion of the domestic notes and bonds for a package of new bonds to be issued.

He noted that debt sustainability analysis conducted so far indicated unequivocally that Ghana’s public debt was unsustainable.

He said the country risked not being able to service its debt down the road unless action was taken.

“Indeed, debt servicing is now absorbing more than half of total government revenues and almost 70 per cent of tax revenues while our total public debt stock, including that of state-owned enterprises exceeds 100 per cent of Gross Domestic Product (GDP).  This is why we are today announcing that the debt exchange will help in restoring our capacity to service debt,”he said.

Mr Ofori-Atta said, that was also the path towards resetting the country’s economy to a more stable one capable of addressing the development challenges of the country.

He said the COVID-19 pandemic, rising global food prices, rising crude oil and energy prices and the Russia-Ukraine war adversely affected Ghana’s macro-economy, with spillovers to the financial sector.

“The combination of adverse external shocks have exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget, which taken together have put our public debt on an unsustainable path,” the Minister of Finance, said.

To address the ongoing economic crisis, he said the government had requested financial support from the International Monetary Fund.

“We expect to reach a Staff-Level Agreement soon on an IMF programme aimed at restoring macro-economic stability and protecting the most vulnerable, ” Mr Ofori-Atta, said.

He said government was determined to implement wide-ranging structural and fiscal reforms to restore fiscal and debt sustainability and support growth.

Mr Ofori-Atta explained that the objective of the debt exchange programme was to alleviate the debt burden in a most transparent, efficient, and expedited manner.

He said the government of Ghana had been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds.

“In particular, it does not embed any principal haircut on Eligible Bonds, as we promised. Let me repeat this fact as plainly as I can, in this debt exchange individual holders of domestic bonds are not affected and will not lose the face value of their investments.

So let us remove any doubt and discard any speculation that the government is about to cut your retirement savings or the notional value of your investments. That is not the case.

As already announced, Treasury Bills are completely exempted, and all holders will be paid the full value of their investments on maturity. There will be nohaircut on the principal of bonds. Individuals who hold bonds will also not be affected at all,” he said.

He explained, the domestic debt operation involved an exchange for new Ghana bonds with a coupon that steps up to 10 per cent as soon as 2025 (with a first interest payment in 2024) and longer average maturity.

Mr Ofori-Atta said existing domestic bonds as of December 1, 2022 would be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037, adding that predetermined allocation ratio were as follows: 17 per cent for the short bonds, 17 per cent for the intermediate bond, 25 per cent for the medium-term bond and 41 per cent for the long-term bond.

“The annual coupon on all of these new bonds will be set at 0 per cent in 2023, 5 per cent in 2024 and 10 per cent from 2025 until maturity. Coupon payments will be semi-annual. For emphasis, this domestic debt exchange programme will not affect individual bondholders,” Mr Ofori-Atta, said.

The Minister of Finance indicated that the domestic debt exchange was part of a more comprehensive agenda to restore debt and financial sustainability, explaining that the government was also working towards a restructuring of our external indebtedness, which would be announced in due course.

“This is a key requirement to allow Ghana’s economy to recover as fast as possible from this crisis. This is also a key requirement to secure an International Monetary Fund support,” Mr Ofori-Atta, stated.

He called on Ghanaians and stakeholders to support the debt restructuring programme, saying it was best option to restore macroeconomic stability.

“The alternative would be a far worse economic crisis, with protracted closure from international markets (including imported goods and services) and further domestic economic instability both for the real economy and the financial sector.

It would also mean depleted fiscal resources to support the neediest,” he said.

Mr Ofori-Atta noted Ghana was not the first nation to undertake such Domestic Debt operation, adding that Jamaica and Greece were successful examples of countries that had embarked on debt restructuring within the last ten years.


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