Ghana to record worst non-oil GDP growth rate over debt restructuring programme
Non-oil GDP growth rate, according to Ranking Member on Parliament’s Finance Committee Dr Cassiel Ato Forson, is expected to decline this year as a result of government’s domestic debt restructuring programme.
Non-oil GDP growth rate for 2022 was 4.3%, per the 2023 budget, non-oil GDP growth rate for this year is projected to be 3% – 1.3% less than the target set for 2022.
According to the former Deputy Finance Chief, the debt exchange programme will have a negative impact on the economy and in turn bring hardships on the citizenry.
In a Facebook post on Tuesday, January 3, 2023, the former Deputy Finance Chief averred that the “haircuts” on domestic and Eurobonds will also have an adverse impact on the banking sector and local businesses.
“This year, Ghana’s economy will record one of the worst non-oil GDP growths due to the impact of the debt restructuring and a plethora of extremely tough fiscal and monetary policies.
“The haircut on domestic bonds and Eurobond is expected to adversely impact the health of the banking sector, local businesses, and individuals! Also, Bilateral debt restructuring will lead to government’s foreign financed projects being abandoned,” he remarked.
“Unemployment will worsen due to the freeze on employment, debt restructuring, poor business climate, and massive austerity.
“Ghana will default in the payment of interest and principal on domestic bonds, Eurobonds, and most of our bilateral loans in 2023.
“This will be compounded by the following: Expected layoffs from the financial sector due to the impact of the debt restructuring and expected layoffs from gov’t foreign financed projects,” he added.
DDEP: Individual bondholders to lose interest on bonds worth GHS 1.9bn
Meanwhile, Finance Chief, Ken Ofori-Atta, has stated that the ‘Invitation to Exchange’ to individual bondholders under the Debt Exchange does not embed any principal haircut on eligible bonds worth GHS 1.9bn – the amended and restated debt exchange memorandum is anticipated to affect individual bonds amounting to GHS 1.9bn in face value.
According to him, it rather involves an exchange for new Government of Ghana bonds with a coupon that steps up to rates ranging from 9.15% to 10.65% (depending on the specific series of new bonds) as soon as 2025 and longer average maturity.
In an Amended and Restated Exchange Memorandum to individual bondholders, Mr. Ofori-Atta said this domestic debt exchange is part of a more comprehensive agenda to restore debt and financial sustainability.
He however said the external debt restructuring parameters will be presented in due course.
“The successful completion of this domestic debt exchange is a critical component of both the debt reduction programme and the International Monetary Fund programme discussions; it will contribute to unlocking the support of the international community and will allow Ghana to reach debt targets agreed with the IMF. We need the full participation of all bondholders in this transaction. Anything less will not make us eligible for assistance. There can be no exception”, he said.
“We are acutely aware of the upfront cost of this transaction, and other aspects of our adjustment programme, to participating holders. To that end we are carving out from this exchange treasury bills (up to one-year maturity) typically held by retail investors”, he continued.
“Further, there is also a positive trade-off for debtholders as a group: this transaction, though resulting in reduced coupon payments from 2023, will make a positive contribution to a safer and brighter future for all Ghanaians”, he added.
