Adongo urges public to exercise patience, spare financial sector from panic withdrawals

Accra, Dec. 06, GNA – Mr Isaac Adongo, the Deputy Ranking Member of the Finance Committee of Parliament, has urged the public not to put undue pressure on the financial sector by rushing to withdraw their funds.

He also encouraged financial institutions and pension funds to reject the Government’s terms under the Domestic Debt Restructuring Programme launched on Monday by Mr Ken Ofori-Atta, the Minister of Finance.

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, 24.

Mr Adongo, who was addressing the media at Parliament House, on Tuesday, alleged that the Programme announced by the Minister for to bondholders was his sole decision and not a collective decision by the government.

“The cabinet can’t approve a transaction that the chief legal officer, Attorney-General says is illegal…so Ken is on his own…” , he alleged.

“Subsequently, it has come to our attention that on 18th November 2022, the chief legal officer of the country, the Attorney-General issued an opinion declaring that transaction as illegal,” he alleged. “When you issue a bond in an agreement, you advertise a prospectus, which becomes the agreement, and you are bound by that agreement and respect them.”

He said the Minority was ready to support any group of investors and bondholders who would agree to unite for a class action against the Finance Minister and also sue the government to proposals the decision.

Mr Adongo said the capital market would suffer a setback should the conditions under debt exchange programme be accepted by institutional bondholders and pensions fund managers.

Mr Adongo, who is also the National Democratic Congress Member of Parliament for Bolgatanga Central, however, said the Minority was also exploring opportunities to see how investors could support the government in an exchange programme that met their mutual requirements.

“We cannot in search of 3 billion dollars from the IMF destroy over 10 billion Ghanaian resources. That will not happen…”.

Mr Ofori-Atta, launching the Domestic the Programme, however, pledged the Government’s resolve to safeguard individual and institutional investments. 

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”. 

“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. 

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. 

Ghana is 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. 

It is negotiating a three-billion dollar bailout deal with the IMF.

Source: Ghana News Agency