Council of State looks for methods to lessen the effects of debt exchange

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In order to be able to provide the government with appropriate advice on how to lessen the impact of the Domestic Debt Exchange Program, the Council of State has collaborated with the Ghana Association of Bankers and the Institute of Chartered Accountants, Ghana (ICAG) (DDEP).

The council promised that it will continue to work with institutions and groups in accordance with its mission and make the required suggestions in order to find appropriate solutions to the country’s problems, particularly the current financial difficulties.

The implications on individual and institutional bondholders as well as the urgency and crucial relevance of the DDEP for a successful conclusion of discussions with the International Monetary Fund (IMF) were taken into consideration by the council, according to a statement released yesterday.

Ghana’s economy is in dire straits, with inflation at 54.1% and a public debt of GH467.4 billion (or 75.9% of GDP), the country is in a state of economic collapse (GDP).

All of the international rating agencies have reduced the country’s credit worthiness to almost junk status, making it almost impossible for it to get financing on the global financial market.

The government has implemented a debt-restructuring program, known as the DDEP, as one of the steps to enable it to reduce the country’s indebtedness to manageable levels, or roughly 55% of GDP in the medium term, while negotiating for a $3 billion loan from the IMF.

However, a large number of holders of government bonds, including both individual bondholders and corporate institutions including banks, rural, and community banks, have vehemently opposed the DDEP.

Following threats from organized labor to launch industrial measures, the government updated the program on December 31 of last year to exclude pension funds. They also changed the design and tripled the deadline for voluntary onboarding.

However, the Ministry of Finance has increased its interactions with many stakeholders over the DDEP.

In an effort to lighten the nation’s debt load and allow the government some breathing room to address the fiscal issues it faces, the Minister of Finance, Ken Ofori-Atta, introduced the government’s voluntary DDEP on December 5 of last year.

Domestic bondholders will see their investment’s tenure stretch and interest rates drop significantly as a result of the DDEP.

Investors in domestic debt are being invited to trade their current securities for 12 new ones that each give a zero coupon (interest) in the first year and 5% in the following year, 2024.

The government is offering to pay a 2% cash charge on the outstanding value of bonds that are expiring this year in exchange for delaying the maturity date of new bonds that will be issued to them until between 2027 and 2033.

The 12 new bonds issued to holders of bonds maturing after 2023 will offer coupons of 8% and 9% between 2024 and 2038.

From 2027 until 2038, a bond is anticipated to mature yearly under this structure.

The DDEP excludes holders of short-term debt securities, such as Treasury bills with terms of 91, 182, and 364 days.


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