GHS137 billion domestic bonds to be exchanged for new ones – Ken Ofori-Atta

Government says Ghana’s domestic notes and bonds totaling about GHS137 billion will be exchanged for new ones by holders of domestic debt to help in restoring the country’s capacity to service debt.

The bonds which include Energy Sector Levies Act (E.S.L.A) and Daakye bonds to be issued by the Republic would create a new path towards resetting the economy to a more stable one capable of addressing the challenges of the country.

Mr Ken Ofori-Atta, Minister of Finance, said this at the launch of Ghana’s domestic debt exchange programme after a broad contour of debt sustainability analysis (DSA) had been concluded.

He said: “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.”

“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,” the Minister said.

He said Covid-19 pandemic, rising global food prices, rising crude oil & energy prices and the Russia-Ukraine war had adversely affected Ghana’s macroeconomy, with spillovers to the financial sector.

Mr Ofori-Atta said domestic debt operation involved an exchange for new Ghana bonds with a coupon that steps up to 10 per cent in 2025 (with a first interest payment in 2024) and with longer average maturity.

“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.Predetermined allocation ratio are as follows: 17 per cent for the short bonds, 17 per cent for the intermediate bond, 25 per cent for the medium-term bond and 41 per cent for the long-term bond,” he said.

The annual coupon on the new bonds would be set at 0 per cent in 2023, 5 per cent in 2024 and 10 per cent from 2025 until maturity and the coupon payments would be semiannual.

“In this debt exchange individual holders of domestic bonds are not affected and will not lose the face value of their investments. So 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,” he added.  

Government had given an assurance that it will take all appropriate measures to safeguard the solvency of the financial institutions involved in the exchange.

It said banks, pension funds, insurance companies, fund managers, and collective investment schemes will be supported, to ensure that they were able to meet their obligations to their clients as they fall due through regulatory measures and Financial Stability Fund (FSF).

Source: Modern Ghana