Chamber of Corporate Trustees rejects debts exchange programme

The Debt Exchange scheme, which was introduced on Monday, December 5, by Finance Minister Ken Ofori-Atta, has been rejected by the Chamber of Corporate Trustees.

According to them, the government’s prodigals “fall short of market expectations, will obliterate Ghanaians’ savings, and further erode market confidence.”

“This is why we categorically reject it. As we seek the best result in our conversations with the Ministry of Finance, we ask pension fund contributors and actors in the pensions industry to maintain their composure, the Chamber said in a statement on Tuesday, December 6.

The goal of the initiative, according to the Finance Minister who introduced it, is to reduce debt as quickly, efficiently, and transparently as possible.

He stated that the Ghanaian government has been working hard to reduce the effects of the local debt exchange on investors who own government bonds in this context by way of an Exchange offer.

As we promised, it specifically does not embed any principal haircut on Eligible Bonds. I’ll say it again as clearly as I can: Individual domestic bond holders are unaffected by this debt exchange and will not lose the face value of their investments. Therefore, let’s dispel any uncertainty and disprove any rumors that the government is planning to reduce your retirement savings or the nominal worth of your investments.

The opposite is true. Treasury Bills are entirely exempt from taxes, as was previously promised, and all holders will receive the full value of their investments upon maturity. The bond principal won’t be reduced in any way. Bond holders would also not be impacted in any way.

“Our domestic debt operation entails the exchange of existing Ghanaian bonds for new Ghanaian notes with a longer average maturity and a coupon that increases to 10% starting in 2025 (with the first interest payment in 2024). A set of four new bonds with maturities in 2027, 2029, 2032, and 2037 will be swapped for existing domestic bonds on December 1, 2022.

“Predetermined allocation ratio are as follows: 17% for the short bonds, 17% for the intermediate bond, 25% for the medium-term bond, and 41% for the long-term bond,” the speaker continued. All of these new bonds will have an annual coupon of 0% in 2023, 5% in 2024, and 10% from 2025 until maturity. Semi-annual coupon payments will be made. To be clear, this domestic debt exchange program won’t have an impact on specific bondholders.

“This domestic debt exchange is a component of a larger plan to get debt and finances back on track. Additionally, we are working to restructure our external debt, which we will notify as soon as it is ready. This is a crucial prerequisite to enable Ghana’s economy to emerge from this crisis as quickly as feasible. This is also a crucial prerequisite to obtaining IMF financing.3

Source: Ekow Coffie