Government calls for voluntary participation in debt restructuring

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Finance Minister Ken Ofori Atta
Finance Minister Ken Ofori Atta

The Government has called on bond holders to support its move for economic restoration, stability and growth by voluntarily taking part in Ghana’s domestic debt exchange programme.

Mr Ken Ofori-Atta, the Minister of Finance, who made the call, at the launch of Ghana’s Domestic Debt Restructuring Programme, in Accra on Monday, pledged the Government’s resolve to safeguard their investments.

The Government has invited eligible holders of domestic notes and bonds of the Republic, E.S.L.A. Plc and Daakye Trust Plc to exchange approximately GHS137.3 billion for a package of new bonds issued by the Republic from Monday, December 5, to Monday, December 19, 2022.

Interest on the new bonds will not accrue until 2024, starting at a five per cent rate in that year, moving up to 10 per cent in 2025. The first interest payment on each bond will be made on June 30, 2024.

The debt restructuring has become necessary as Ghana’s debt has reached an unsustainable level, with the Government at the risk of not meeting its domestic debt obligations of approximately GHS137 billion.

Ghana’s debt servicing is now absorbing more than half of total government revenues and about 70 per cent of tax revenues, while total public debt stock, including that of State-Owned Enterprises exceeds 100 per cent of Gross Domestic Product (GDP).

The goal of the debt restructuring was to put Ghana unto a sustainable development path – one of fiscal responsibility, economic stability and growth that would truly translate into improving the lives of the people and all the nation’s economic actors, including investors, Mr Ofori-Atta said.

He said the Government had taken several measures to restore and sustain debt sustainability but noted that such move would require the “active participation of all key economic actors”.

“In that perspective, we call upon all domestic debt holders to take their share in ensuring that public debt sustainability is quickly restored by participating in this exchange programme,” he said.

“Our pledge to you is that Government will take all appropriate measures to safeguard the solvency of financial institutions involved in the exchange,” he stated.

Mr Ofori-Atta also said that banks, pension funds, insurance companies, fund managers would be supported to ensure that they are able to meet their obligations to their clients through well-targeted regulatory measures and the creation of a Financial Stability Fund (FSF).

He said the Government was confident that the debt restructuring programme, together with expenditure cutting measures and policies to be implemented under the International Monetary Fund (IMF) loan support programme, would set Ghana’s economy unto a path of stability.

The Finance Minister, therefore, cautioned against the spread of information that would further dampen market confidence following the downgrade of Ghana’s debt sustainability by three international ratings agencies to the worst since 2003.

He said: “Let us remove any doubt and discard any speculation that the Government is about to cut your retirement savings or the notional value of your investments. That is not the case.”

Making references to the case of Jamaica and Greece, whose debt restructuring yielded positive results, Mr Ofori-Atta assured debt holders and the investing community that the Government would commit to making the programme a “success.”

Ghana is currently going through economic hardship brought about by the adverse effects COVID-19 pandemic, rising global food prices, rising crude oil and energy prices and the Russia-Ukraine, with spillovers to the financial sector.

The combination of adverse external shocks has exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget, which taken together have put the public debt on an unsustainable path.

The Ghana News Agency reported earlier in the year walking long distances and riding of bicycles had become the norm for many Ghanaians to endure the economic hardship, while others had reduced the number of times they ate in a day.

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