The Minister of Finance, Ken Ofori-Atta, says the newly launched Domestic Debt Exchange Programme is the path towards resetting the economy to a more stable one capable of addressing the country’s development challenges.
He explained that, per the Debt Sustainability Analysis (DSA), Ghana’s public debt is unsustainable and that the government may not be able to fully service its debt down the road, if no action is taken.
According to him, debt servicing is now absorbing more than half of total government revenues and almost 70 percent of tax revenues, while the country’s total public debt stock, including that of State-Owned Enterprises, exceeds 100 percent of the nation’s gross domestic product (GDP).
Speaking at the launch of the programme yesterday, Mr Ofori-Atta noted that without the programme, 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. This is why we are announcing the debt exchange which will help in restoring our capacity to service debt,” Mr Ofori-Atta said.
The Finance Minister was positive that the measures put in place by the government, including those outlined in the 2023 Budget Statement, and underpinned by a successful IMF programme, will witness a stable and thriving economy from 2023.
“We, accordingly, anticipate that inflation will be returned to a single digit, ensuring that real returns on these new bonds will be protected. This debt exchange provides an orderly way to put our economy back on track. These efforts will be complemented by fiscal measures to protect the neediest and most vulnerable in society,” he said.
To this end, he called for overwhelming support for the exchange, noting that the success of the programme depends upon the public’s cooperation.
Citing Jamaica and Greece, where similar programmes have been undertaken, Mr Ofori-Atta said “the Domestic Debt Exchange has yielded positive results both in Greece and Jamaica, and many others, and will certainly put our economy on a much stronger footing.”
Under the domestic debt exchange, local bonds will be exchanged for new ones maturing in 2027, 2029, 2032, and 2037 and their annual coupon will be set at 0% in 2023, 5% in 2024, and 10% from 2025 until maturity.
Also, Mr Ofori-Atta gave the assurance that the government will not cut retirement savings or the notional value of the investment as part of its domestic debt exchange programme.
He said the government had instituted measures to alleviate the impact of the programme on investors.
“The government has been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds. In particular, it does not imbed any principal haircut on eligible bonds as we promised; let me repeat this fact as plainly as I can; in this debt exchange, individuals holding domestic bonds will not lose but the value of their investment will be retained,” he said.
Eligible holders invited
Meanwhile, the Finance Ministry has announced in a statement that it is inviting eligible holders to exchange GHC137.3 billion of the domestic notes and bonds, including Energy Sector Levy Act Plc and Daakye Trust Plc, for a package of new bonds to be issued by the country.
It said offers may only be submitted starting from December 5, 2022, and ending at 4:00 p.m. (Greenwich Mean Time (GMT)) on December 19, 2022.
However, Ghana may at its sole discretion extend the expiration date, including for one or more series of eligible bonds.
The invitation is available only to registered holders of eligible bonds that are not individual investors or that are otherwise authorised by the Government of Ghana, in its sole discretion, to participate in the invitation.
It said eligible holders tendering their eligible bonds pursuant to the invitation would receive new bonds of the country on the terms and subject to the conditions described in the Exchange Memorandum.
It said such eligible bonds constituted all the eligible bonds owned by them and consent to the blocking by the Central Securities Depository of any attempt to transfer them prior to the settlement date or the termination of the Invitation by the country.
“Morrow Sodali Limited is acting as the information and coordination agent while Lazard Frères is acting as financial advisor to Ghana in connection with the invitation. Any questions or requests for assistance regarding the Invitation may be directed to CSD and/or the Information and Coordination Agent at the contact information,” it said.
“Eligible Holders, or custodians for such holders, of Eligible Bonds may obtain a copy of the Exchange Memorandum by accessing the Invitation Website https://projects.morrowsodali.com/ghanadde,” it added.