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Debt Exchange: Breakdown of domestic bondholders

3 years ago
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Debt Exchange: Breakdown of domestic bondholders

Ghana’s domestic debt exchange programme, which is a crucial element of securing a $3bn loan from the International Monetary Fund (IMF), is in danger of collapse due to increasing pressure from bondholders to be exempted from the scheme.

The programme, which aims to replace existing bonds with discounted new bonds of lower value, has been met with resistance from bondholders who argue that it would result in substantial losses for them.

According to data from the Bank of Ghana, domestic bondholders hold GH₵152.4bn ($28bn) worth of government securities, with local investors accounting for 84% of this total. The IMF has made it clear that the approval of the loan is dependent on the success of the debt exchange programme, and any additional exemptions will mean that the government cannot achieve its target of 80% participation.

The IMF and Ghana have reached a staff-level agreement on economic policies and reforms to be supported by a new three-year arrangement under the Extended Credit Facility, however, the IMF’s approval of the deal is contingent on a successful debt exchange programme.

The breakdown of domestic bondholders by tenor shows that short-term debt accounts for 14.6% of the domestic marketable debt stock, medium-term debt accounts for 74.2% and long-term debt accounts for 11.2%.

Domestic investors have deepened their participation in the domestic bond market in recent years, with local investors holding GH₵152.4bn worth of government securities in 2021, an increase of 25% from 2020.

The government has modified the terms of the programme, including the creation of eight additional instruments to be created, bringing the total number of new bonds to 12, with one maturing each year from 2027 to 2038.

However, despite the initial exemption of pension funds from the programme, individual bondholders have been included in the scheme and are opposing it.

The following is the breakdown of domestic bondholders: 

GH₵181.3bn domestic debt

The Annual Public Debt Report for the 2021 financial year put the total domestic debt at GH₵181.3 billion (GH₵181,397.2 million).

GH₵152.4bn held by Ghanaians

According to the report, Ghanaians hold GH₵152.4 billion (GH₵152,401.9 million) of the domestic debt representing 84%.

GH₵28.9bn of domestic debt held by foreigners

On the other hand, foreign investors are holding GH₵28.9 billion (GH₵28,995.3 million) of Ghana’s domestic debt, amounting to 16%.

GH₵91bn held by banking sector

Out of the GH₵181.3 billion domestic debt, the banking sector alone accounts for GH₵91 billion (GH₵91,032.2 million) representing 50.2%

GH₵35.8bn held by Bank of Ghana

A further break down of the banking sector’s component shows that the Bank of Ghana (BoG) is responsible for GH₵35.8 billion (GH₵35,861.7) representing 19.8% of the GH₵181.3 billion domestic debt.

GH₵55.1bn held by Commercial Banks

The report shows that Commercial Banks hold GH₵55.1 billion (GH₵55,170.5 million) which amounts to 30.4% of the total domestic debt in 2021.

GH₵2bn held by Rural Banks

Per the report, Rural Banks also have some GH₵2 billion (GH₵2,006.7 million) representing 1.1% of domestic debt.

GH₵61.3bn held by Non-Bank Sector

On the other hand, the Non-Bank Sector has GH₵61.3 billion (GH₵61,369.7 million) representing 33.8% locked up in domestic debts.

GH₵16.7bn held by individual investors

According to the report, individual investors account for GH₵16.7 billion (GH₵16,717.6 million) which represents 9.2% overall domestic debt.

GH₵ 41bn held by Firms and institutions

Firms and institutions also hold GH₵41 billion (GH₵41,013.8 million) of the domestic debt which represents 22.6%.

GH₵1bn held by insurance companies

According to the data, insurance companies account for over GH₵1 billion (GH₵1,094.6 million) which amounts to 0.6% of the total domestic debt in 2021.

GH₵ 537.1m held by SSNIT

In respect of the Social Security and National Insurance Trust (SSNIT), it accounts for GH₵537.1 million constituting 0.3% of overall domestic debt.

 

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