Govt Domestic Debts Exchange Program To Be Launched Monday; No Haircut On Treasury Bills, Principal Bonds | Economy

The government will on Monday launch the Debt Exchange program announced in the 2023 budget.

This is after series of engagements with key stakeholders.

The Ghana Debt Exchange (GDX) program has been informed by a Debt Sustainability Analysis that revealed public debt, excluding overdraft, state-owned enterprises (SOEs) and special purpose vehicles (SPVs) as a ratio of Gross Domestic Product (GDP) to be 75.9 per cent as of the end of September 2022.

The Minister of Finance, Ken Ofori-Atta, in the 2023 Budget Statement said a full debt exchange program will be outlined.

The Bank of Ghana also alluded to that in its Monetary Policy Report issued of November 28, 2022.

The debt operation is part of a comprehensive set of measures for reducing the present value of public debt to Gross Domestic Product (GDP) ratio to, at least, 55 per cent in the medium term by offering an effective cap on interest payments on public debt .

Sources indicate that except for Treasury Bills (T-bills), all locally issued bonds and notes of the government will be eligible for the domestic debt exchange.

This suggests that bonds and notes denominated in US dollars and bonds issued by ESLA and Daakye will be eligible under the GDX.

Available information indicates that the proposed GDX, which invites eligible holders to voluntarily tender their holdings, does not entail any nominal haircut, as promised by President Akufo-Addo.

However, it involves extending the maturity period and a reduction in the average coupon rate.

Persons close to the issue have intimated that the debt exchange program will complement both expenditure rationalization and revenue-enhancing measures outlined in the 2023 Budget and enable Ghana to unlock the IMF program disbursements, which is critical to mitigating the current pressures on public finance, the Cedi and inflation.

Domestic debt exchange: No haircut on treasury bills, principal bonds

In a televised announcement on Sunday night (December 4, 2022), the Minister of Finance, Ken Ofori-Atta said there will be no “haircut” on the principal of bonds and that individuals with government bonds will have their full investments on maturity.

On allegations of possible haircuts on all bonds and treasury bills following government's debt restructuring deal with the International Monetary Fund (IMF), Mr. Ofori-Atta said government will ensure that people's investments are safe.

“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. Individual holders of bonds will not be affected,” he said.

Mr Ofori-Atta added that the government has concluded the broad contours of the debt sustainability analysis and details on Ghana's domestic debt exchange will be launched on Monday, December 5, 2022.