‘We Can’t Access IMF Loan If We Don’t Restructure Debt,’ Ghana Govt Pleads With Bond Holders

The Government of Ghana has dismissed plans to force bondholders to participate in the bond swap programme.

The government is also pleading with domestic debt holders to participate in the debt restructuring programme so that the country can exit the distress in the shortest possible time.

The minister of Finance, Ken Ofori-Atta, made the statement on Monday during an update on the state of the Ghanaian economy.

THE WHISTLER had reported that the country had begun a debt swap under which arrangement, old bondholders will swap for a set of four new ones maturing in 2027, 2029, 2032 and 2037.

The coupon on the bonds will be set at zero per cent in 2023, five per cent in 2024, 10 per cent from 2025 until maturity.

But the Minister is confident that the measure will translate into improving the lives of Ghanaians.

Ofori-Atta said, “The alternative will be a far worse economic crisis with protracted closure from the international market including imported goods and services and further domestic economic instability both for the real economy and the financial sector.

“Ghana is not the first nation to undertake such domestic debt operation. To illustrate a point let me cite the example of just two countries among many others in the last two decades.”

He mentioned Jamaica’s case with “99 per cent participation” and Greece where he said the authorities chose to undertake a coercive approach whereby a law was passed to force people into participating.

The minister revealed, “We intend to avoid as much as possible the Greek approach as we strive to reach a consensual solution of our bondholders which really is the Ghanaian way.

“We are confident that with the measures we are putting in place, including those outlined in the 2023 budget statements and underpinned by a successful IMF programme, Ghana will witness a stable and thriving economy from 2023.

“We accordingly anticipate that inflation will return to a single digit ensuring that real returns on these bonds will be protected.”

He also said that the government is working towards restructuring Ghana’s external indebtedness adding it “will be announced in due course.

For Ghana, the debt swap is critical to secure financial assistance from the International Monetary Fund.

Ghana President, Nana Akufo-Ado October hinted at bringing “public debt-to-GDP to 55 per cent by 2028.”

Based on IMF projections, Ghana’s debt-to-GDP ratio will rise to 90.7 per cent by the end of 2022.

Ofori-Atta said, “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.

“Our pledge to you all is that government will take all the appropriate measures to safeguard the solvency of the financial institutions involved in the exchange.

“Regulatory forbearance will be provided to all entities whose financial positions are adversely affected by virtue of participating in this exchange.

“These efforts will be complemented by fiscal measures to protect the needy and most vulnerable in society. The government expects overwhelming support for this exchange and of truth, the success depends upon public cooperation. We are all in this together and we expect to get out of this together.”