The Minister of Finance, Ken Ofori-Atta, has called on bondholders to participate fully in the Domestic Debt Exchange Programme (DDEP) in order to ensure the success of the government’s debt operation.
With the recent amendments to the framework of the DDEP and agreements with key stakeholders, he emphasised that time is of the essence, as further setbacks could put severe strain and stress on the economy. The debt operation remains key for the government to reach a final agreement with the International Monetary Fund (IMF).
In an economic update yesterday, the finance minister said significant amendments have enabled government reach an agreement with key domestic creditor categories including banks, insurance companies, capital market players and foreign holders of domestic debt in relation to their participation in the DDEP.
He stated that this became necessary in order for the government to reach a resolution that ensures an orderly path out of the country’s economic challenges, “anchored by a sense of community and empathy.”
“Frankly, non-participation or a lower-than-expected turnout for the DDEP will prolong efforts to resolve the current economic crisis. In addition, the prospects of international financial support and other financial assurances would be jeopardized. This development could further put strain and stress on the government’s capacity to honour key commitments. This is not what we want for our economy,” the Minister said.
“Undoubtedly, the participation of the banks, insurance companies and the securities industry, under the enhanced DDEP is a significant milestone which represents a response to a call to national duty. It is a critical step to restore macro-economic stability; accelerate Ghana’s economic growth under an IMF Programme; and leverage other international financial support,” Mr. Ofori-Atta emphasised.
In December 2022, the government invited all holders of Ghana’s bonds to voluntarily exchange their holdings for new bonds whose terms were compatible with its desired downward debt trajectory, within the context that, for Ghana to reach the required debt sustainability threshold of debt-to-GDP of 55 percent, it was important to review the interest rates and maturities of the existing bonds.
However, there were emerging concerns by bondholders about the nature of the debt operation, forcing the government to recalibrate the framework of the DDEP.
On the back of these recent developments, the comprehensive agreement with the key stakeholders and the enhancement of the DDEP, the government expects the full participation of institutional stakeholders and the mobilisation of all qualified investors, to ensure the success of the debt exchange operation.
The Minster further encouraged eligible individual bondholders to voluntarily tender their holdings.
The updated memorandum for the debt exchange programme has reclassified eligible bondholders into three categories with different terms for each category. Category A bondholders include all investment schemes, such as mutual funds or unit trusts, and all individual bondholders below the age of 59. Investors in this category are eligible to hold two bonds which will mature in 2027 and 2028, with principals in a ratio of 50:50 ratio and 10 percent interest per year.
Category B bondholders include all individual bondholders aged 59 or older. Category B holders have similar terms as Category A; however, they will receive 15 percent interest per year.
The last group is the General Category bondholders. These are bondholders who are neither Category A or Category B bondholders. These bondholders will still tender their old bonds for 12 new bonds as per the previous terms, but with a slight change in the interest payment structure.
The objective of this is to ensure that individuals, especially retirees, who put their hard-earned savings in the domestic market, are not left in hardship as a result of the DDEP and yet contribute to the resolution of our current crisis.
“What we want is an economy that is back on track, stable, vibrant, productive, dynamic; meeting the needs of individuals, households, and enterprises; delivering shared and inclusive growth; and improving incomes and livelihoods,” the Minister said.
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