GHS 137bn of investor funds to be impacted by government’s debt exchange programme
A total amount of GHS 137bn in invested funds by local investors is to be affected by the announced Domestic Debt Exchange Programme (DDEP) by government.
GHS denominated Notes and Bonds issued by the Republic of Ghana accounts for the largest portion of the domestic debt being GHS 126bn in total value.
GHS denominated bonds issued by E.S.L.A. Plc and Daakye Trust Plc account for GHS 8.3bn and GHS 2.7bn respectively of the total domestic bond value.
The DDEP the country’s Finance Chief Ken Ofori-Atta noted, will require domestic bondholders to exchange their existing debt instruments for new ones.
According to the Finance Minister, existing bonds as of December 1, 2022 will be exchanged for a set of four (4) new bonds maturing 2027, 2029, 2032 and 2037.
The annual coupon on the new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.
Addressing journalists on the DDEP during a press briefing on Monday, December 5, the Finance Minister assured that treasury bills are completely exempted from the debt exchange programme and all holders will be paid the full value of their investments on maturity.
Additionally, there will be no haircut on the principal value of bonds.
To minimize the impact of the debt exchange programme on the financial sector as a whole, the Minister revealed plans
by government to set up a Financial Stability Fund (FSF) with the sole purpose of minimizing the impact of government’s domestic debt exchange programme on the financial sector.
According to the Finance Minister, the FSF established with the help of development partners will provide liquidity support banks, pension funds, insurance companies, fund management companies in the country.
This, he noted in an address on Sunday, December 4, 2022, is to ensure that the financial institutions meet their obligations to the Investing public.
“Government recognizes that our financial institutions holds a substantial proportion of these bonds. As such the potential impact of this exchange on the financial sector has been assessed by their respective regulators.
“Working together, these regulators have pout in place appropriate measures and safeguards to minimize the potential impact on the financial sector and to ensure that financial stability is preserved.
“A Financial Stability Fund is being established by government with the help of development partners to provide liquidity support to banks, pension funds, insurance companies, fund managers and collective investment schemes to ensure that they are able to meet their obligations to clients as they fall due,” quipped the Finance Minister.
