The Minister of Finance, Ken Ofori-Atta, has assured of improved economic stability with a successful completion of the Domestic Debt Exchange Programme (DDEP).
The programme, which he says forms part of government’s response strategy to addressing the current economic challenges, will impact positively on inflation, exchange rates, interest rates, as well as bring some relief to businesses and families.
“I am confident that the programme government has set out for this year, supported by parliament, will get us out of the economic crisis that has besieged our economy since COVID-19 reached our shores back in March 2020. I am confident that with conclusion of the Domestic Debt Exchange programme we will experience stability in exchange rates, inflation and interest rates – bringing businesses and families some respite, the minister said in his address to parliament on details of the debt exchange programme.
As of December 2022, the total outstanding debt – to eligible and non-eligible bondholders – amounted to approximately GH¢137billion. Subsequent extensions of dates and payment of maturities meant that the remaining stock was reduced from GH¢137billion to GH¢130billion.
However, the finance minister noted that the eligible bonds as per the exchange memorandum meant an exclusion of pension funds and bonds that were subject to swap mechanisms for monetary and exchange rate policy operations.
This then brought the eligible bonds for tendering to GH¢97.75billion. Out of the total eligible bonds for tendering, GH¢83billion was successfully tendered – accounting for about 85 percent of outstanding eligible amounts and meeting the target of 80 percent threshold as expressed in the memorandum of exchange.
Nonetheless, the GH¢83billion bonds that were successfully tendered represent 64 percent of the outstanding debt stock of GH¢130billion at end-December 2022.
“The Domestic Debt Exchange Programme was to alleviate the debt burden while minimising its impact on investors and the financial sector,” he told the parliamentarians.
According to the minister, since the first announcement there have been multiple engagements with stakeholders – leading to a number of amendments to the terms of the offer, with a final extension deadline of February 7, 2023 and an administrative extension of February 14, 2023.
The final terms of the DDEP, he said, were designed to address the specific concerns of different bondholder categories: comprising category A, collective investment schemes and natural persons below the age of 59; category B, natural persons 59 years old or older; and general category holders, representing all other holders except those in categories A and B.
The finance minister further noted that category A holders tendered an amount of GH¢5.9billion, representing 6.06 percent of the eligible bonds; with category B tendering GH¢423 million, representing 0.4 percent; and category C tendering an amount of GH¢76.6billion, representing 78 percent.
Mr. Ofori Atta extended government’s gratitude to bondholders who participated in the programme: “We wish to thank everyone who has tendered and supported the domestic debt exchange programme. It is a truly remarkable act of sacrifice in our nation’s history. Your timely support is deeply appreciated.
“We also appreciate the concerns of those who may still be uncertain in these choices, and I trust that we can continue to engage, work together to reset the fundamental issues of the economy and reposition our economy.”
We will not imperil financial sector
Mr. Ofori-Atta also assured of the government’s willingness to protect and support banks and other financial institutions in the country to aid the recovery process.
“We are determined to protect banks operating in Ghana and strengthen their capacity to finance the economic recovery and growth we see before us,” the minister said.
While acknowledging that the economy is in serious crisis, Mr. Ofori-Atta assured that prudential measures are being employed to mitigate further impacts on the financial landscape and most importantly, on domestic creditors.
“Government is mindful of the exchange’s ramifications on the country’s financial health. As a result, the government is developing several prudential measures to mitigate the potential impact on domestic creditors, considering the need to preserve financial stability. Billions of taxpayer’s monies were used between 2017 and 2019 to rescue the financial sector. We have no intention to imperil that work,” he assured.
Financial Stability Fund
Mr. Ofori Atta also informed parliament of a Financial Stability Fund that is being established to cushion banks, pension funds and insurance companies, among others, to shore-up their liquidity.
“In addition, a Financial Stability Fund (FSF) is being established by government with the help of development partners to provide liquidity and solvency 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,” he stated.