Investors To Lose As Ghana Govt Begins Domestic Debt Swap To Save Economy

Ghana will commence a domestic debt swap where bonds issued locally will be exchanged for new ones.

Ghana’s Minister for Finance, Ken Ofori-Atta, made the disclosure in a notice seen by THE WHISTLER.

The new debt plan will begin on Monday, December 5, 2022.

Ofori-Atta said the country’s Debt Sustainability Analysis has been concluded, but he however did not make disclosure for foreign creditors.

He said, “Under the Programme, domestic bondholders will be asked to exchange their instruments for new ones.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.

“The annual coupon on all of these new bonds will be set at 0 per cent in 2023, 5 per cent in 2024 and 10 per cent from 2025 until maturity. Coupon payments will be semi-annual.”

Ghana has been plagued by debt management crisis of $54.4bn, up from $32bn in 2017.

The IMF projects Ghana’s debt-to-GDP ratio will rise to 90.7 per cent by the end of 2022 from 31.3 per cent in 2011.

The ceddi has plunged more than 50 per cent against the US dollar in 2022.

Inflation in Ghana has hit a 21-year-high, while the central bank lifted the lending rate to 27 per cent in November.

The Ghanaian authority said it has also assessed the impact on debt holders, adding it is committed to Ghanaians and the investor community.

The debt swap is in line with negotiations with the IMF to restore macroeconomic stability in the shortest possible time and enable investors to realize the benefits of this Debt Exchange.

A debt sustainability analysis conducted by the IMF and the World Bank in 2021 put Ghana at high risk of external debt distress.

To protect small investors individuals and vulnerable groups from the impact of the domestic debt exchange, Ofori-Atta said Treasury Bills are completely exempted while all holders will be paid the full value of their investments on maturity.

“There will be no haircut on the principal of bonds. Individual holders of bonds will not be affected.

“The Government recognizes that our financial institutions hold a substantial proportion of these bonds. As such, the potential impact of this exchange on the financial sector has been assessed by their respective regulators,” he added.