Ghana’s Domestic Debt Exchange Program was launched by Finance Minister Ken Ofori-Atta in an effort to improve the country’s ability to pay down its debt.
The Finance Minister stated that the goal of the program was to “invite holders of domestic debt to voluntarily exchange approximately GH137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic” at the program’s launch on Monday, December 5, 2022 at the Ministry of Information.
The Government “may not be able to completely service its debt down the road if no action is done,” according to Mr. Ofori-Atta, thus it is imperative that his Ministry and the Government take such dramatic action right away.
“The Debt Sustainability Analysis (DSA) demonstrated unequivocally that 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. Indeed, debt servicing is now absorbing more than half of total government revenues and almost 70% of tax revenues, while our total public debt stock, including that of State-Owned Enterprises and all, exceeds 100% of our GDP. This is why we are today announcing the debt exchange, which will help in restoring our capacity to service debt.”
Additionally, he reaffirmed the Government’s guarantees that the principal of bonds and Treasury Bills won’t be reduced, in response to rumors that investors would soon lose their money if the Government pursued a plan to restructure its debt.
“Let me reiterate this point as clearly as I can: holders of domestic bonds will not suffer any losses, will not be impacted, and will keep the value of their assets.
So let’s dispel any ambiguity and rule out any rumors that the government is planning to reduce your retirement holdings.
“As already announced, Treasury Bills are completely exempted, and all holders will be able to recover the total amount of their investment on maturity. There will be no haircuts on the principal of bonds and individuals that holds bonds will not be affected.”
Last week, there were several reports of panicked withdrawals from bonds and Treasury Bills due to rumors that the government was about to reduce investors’ yields.
In order to avoid unwarranted investor panic, Mr. Ofori-Atta pleaded with the media to exercise caution and distribute accurate facts about the present economic situation and the government’s debt exchange scheme.
He continued by saying that the different financial regulators and stakeholders had been enlisted to guarantee the exchange program’s success.