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Ghana: Minority Opposes Debt Restructuring Programme

Source The Ghana Report

The Minority in Parliament has rejected the government’s proposed debt exchange programme announced by Finance Minister Ken Ofori Atta.

At a presser on Monday, December 5, Minority Leader Haruna Iddrisu said the debt exchange programme intended to restructure the country’s debt into more sustainable levels is unacceptable.

“Let me state, without any fear of contradiction, that the form and structure of the debt restructuring plan announced by Ken Ofori-Atta are unacceptable to us, and we simply will not accept it. How come the contours of this exchange programme were not announced in the 2023 budget statement that was presented to Parliament?

“Were investors consulted, were bondholders consulted, and how did he come to this conclusion? Are we not right to state that this amounts to an economic imposition,” he quizzed.

According to the Tamale South MP, the recent development has dire consequences for the government and generally Ghana’s financial sector.

“It has dire consequences on jobs, dire consequences on pensions, dire consequences on loans and dire consequences on those who are compelled by legislation to invest at least 75 per cent on government instruments and government bonds. We expected the government to have thoroughly engaged and consulted before making this far-reaching announcement.

“This development will deter investors who were not privy to these new terms. The best way to manage a crisis in our view is to anticipate it or reduce its impact or at best prevent it from happening. They [Akufo-Addo – Bawumia led administration] simply failed to prevent it from happening,” he added.

The minority’s concerns come shortly after the launch of the Domestic Debt Exchange Programme on Monday, December 5.

The objective of this programme is to alleviate the debt burden in a most transparent, efficient, and expedited manner. In this context, the Finance Minister explained that by means of an Exchange offer, the Government of Ghana has been working hard to minimize 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 nominal value of your investments. That is not the case,” he reiterated at the launch.

To allay the fears of the general public, Mr Ofori-Atta stressed that Treasury Bills are completely exempted, and all holders will be paid the full value of their investments on maturity.

Also, there will be no haircut on the principal of bonds. Individuals who hold bonds will also not be affected at all.

“Our domestic debt operation involves an exchange for new Ghana bonds with a coupon that steps up to 10% as soon as 2025 (with a first interest payment in 2024) and longer average maturity. Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

“Predetermined allocation ratios are as follows: 17% for the short bonds, 17% for the intermediate bond, 25% for the medium-term bond and 41% for the long-term bond. The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.

“Coupon payments will be semi-annual. For emphasis, this domestic debt exchange programme will not affect individual bondholders,” he added.

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