Government is optimistic that it will reach a Staff-Level Agreement soon with the International Monetary Fund, IMF, for a programme aimed at restoring macroeconomic stability and protecting the most vulnerable.
To this end, it is determined to implement wide-ranging structural and fiscal reforms to restore fiscal and debt sustainability and support growth.
Addressing the media at the launch of Ghana’s Domestic Debt Exchange Programme, Finance Minister, Ken Ofori-Atta noted that this domestic debt exchange is part of a more comprehensive agenda to restore debt and financial sustainability
“In this context, by means of an Exchange offer, The Government of Ghana has been working hard to minimize the impact of the domestic debt exchange on investors holding government bonds,” he said.
Ken Ofori-Atta noted that the aim of the programme is to alleviate the debt burden in a most transparent, efficient, and expedited manner.
“We are also working towards a restructuring of our external indebtedness, which we will announce in due course. This is a key requirement to allow Ghana’s economy to recover as fast as possible from this crisis. This is also a key requirement to secure an IMF support,” he added.
He posited government’s hope that the measures put in place, including those outlined in the 2023 Budget Statement and underpinned by a successful IMF programme, Ghana will witness a stable and thriving economy from 2023.
Accordingly, he noted that there is anticipation that inflation will be returned to single digit, ensuring that real returns on these new bonds will be protected.
What the DDEP operation involves
The programme does not embed any principal haircut on Eligible Bonds. Individual holders of domestic bonds are not affected and will not lose the face value of their investments.
Treasury Bills are completely exempted, and all holders will be paid the full value of their investments on maturity.
There will be no haircut on the principal of bonds. Individuals who hold bonds will also not be affected at all.
The domestic debt operation involves an exchange for new Ghana bonds with a coupon that steps up to 10% as soon as 2025 (with a first interest payment in 2024) and 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% for the short bonds, 17% for the intermediate bond, 25% for the medium-term bond and 41% for the longterm bond.
The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments will be semiannual. For emphasis, this domestic debt exchange programme will not affect individual bondholders.