Some financial institutions in the country have begun engaging their customers over Government of Ghana (GoG) Debt Exchange Programme announced recently by the Finance Minister, Ken Ofori-Atta.
The banks are seeking to know the decisions of the customers who purchased GoG bonds through them to either confirm their acceptance of the programme or otherwise.
The customers have until today Wednesday January 11, 2023 to make their decisions known for onward action.
However most of the bondholders have rejected the proposal threatening to go to court.
One of the messages sent by a financial institution to its customers, sighted by DGN Online states that “Dear clients, we wish to inform you that all individuals who purchase GoG bonds through …..are required to confirm their acceptance of the debt exchange programme or otherwise by contacting their branches by Wednesday January 11, 2023.”
The individual bondholders running into about 480,000 and mostly pensioners say they are not signing on to the deal, indicating that they would take available steps to recoup their investments.
According to them, if corporate pension funds could be exempted from the programme they don’t see why similar gesture cannot be extended to them.
The individual bondholders under the aegis of Ghana Individual Bondholders Forum (IBF), a group of voluntary bondholders, is urging individual bondholders to reject and refrain from complying with the mandatory deadline imposed under the Domestic Debt Exchange (DDE) programme.
It rather wants them to join the efforts of the IBF.
In a statement signed by Senyo Hosi, the immediate past Chief Executive of the Chamber of Bulk Oil Distribution Companies, urged indirect bondholders (investors in mutual funds, cash trusts, balance funds) to inform their fund managers not to accept the DDE.
It advised government to open a channel of communication for immediate frank, transparent and sincere dialogue on the DDE with the IBF with the view to seeking an effective resolution to the developing impasse and the fast-depleting confidence in the Ghanaian economy.
It added that “the medium- to long-term prospect and outlook of the domestic investment culture in Ghana is going to be affected by this DDE initiative and we call on government to demonstrate the needed sensitivity to enable a constructive resolution in the best interest of all”.
However, the Ministry of Finance had indicated that eligible bondholders who refuse to participate in government’s debt exchange programme(DDE) will not benefit from the new arrangement outlined by government in case there is default in payment.
Government, is seeking an International Monetary Fund Programme that requires a debt restructuring before a deal could be reached with the Bretton Wood institution. Bondholders have until January 17, 2023 to accept the new arrangement which include some suspension of interest payments.
“For those not participating in the domestic debt exchange, they will continue to hold the non-tendered eligible bonds – the “old” bonds. However, the Government reserves the right to ensure that “old” bonds do not benefit from their non-participation in the domestic debt exchange, including through additional regulatory measures”, the Ministry, in a Frequently Asked Questions (FAQs) statement said.
The IBF investments are in Government of Ghana Local Cedi Bonds, Government of Ghana Local US Dollar Bonds, ESLA Bonds, Daakye Bonds, Ghana Eurobonds and Collective Investment Schemes.
The Minister for Finance had launched Ghana’s Domestic Debt Exchange Programme with the hope of restoring the nation’s capacity to service its debt.
Speaking at the launch at the Ministry of Information on Monday, December 5, 2022, the Finance Minister said the objective of the Programme is “to invite holders of domestic debt to voluntarily exchange approximately GH¢137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic.”
Mr. Ofori-Atta said it was time for his Ministry and the Government to take such drastic measures now because “the Government may not be able to fully service its debt down the road if no action is taken.”
“The Debt Sustainability Analysis (DSA) demonstrated unequivocally that Ghana’s public debt is unsustainable, and that the Government may not be able to fully service its debt down the road if no action is taken. Indeed, debt servicing is now absorbing more than half of total government revenues and almost 70% of tax revenues, while our total public debt stock, including that of State-Owned Enterprises and all, exceeds 100% of our GDP. This is why we are today announcing the debt exchange, which will help in restoring our capacity to service debt.”
He also reiterated the Government’s assurances that there will be no haircut on the principal of bonds and Treasury Bills, against rumours that investors are well on their way to losing their investments in a debt restructuring drive to be undertaken soon by the Government.
“Let me repeat this fact as plainly as I can, in this debt exchange, individuals holding domestic bonds will not lose, they will not be affected, and they will retain the value of their investments. So let us remove any doubt and discard any speculation that the Government is about to cut your retirement holdings.
“As already announced, Treasury Bills are completely exempted, and all holders will be able to recover the total amount of their investment on maturity. There will be no haircuts on the principal of bonds and individuals that hold bonds will not be affected.”
He added that the various stakeholders and regulators in the financial sector have been engaged to ensure the success of the exchange program.
“Specifically, the Bank of Ghana, the Securities & Exchange Commission, the National Insurance Commission, and the National Pensions Regulatory Authority will ensure that the impact of the debt operation on your financial institution is minimized, using all regulatory tools available to them.”
Source: Daily Guide