Debt Exchange: We’ll engage the government on the plans, so keep calm – Chamber of Corporate Trustees

All pension fund contributors and those impacted by the Debt Exchange programme have been urged to maintain their composure while they wait to discuss the recommendations with the government, according to the Chamber of Corporate Trustees.

During the thought leadership forum, “Debt Restructuring: What it Means for Your Investment,” hosted by Media General on Thursday, December 8, Executive Secretary of the Chamber of Corporate Trustees Thomas Esso stated that many of the concerns will be addressed during the engagements with the Finance Ministry.

It will be too soon for us to tell the media what to expect, he said. We are awaiting the government’s invitation to the negotiation table so that we may let them know what we are willing to accept.

“Our contributors need to just remain composed. We are confident that the administration will request a meeting with us to discuss these recommendations. We’re willing to work with the government to find a solution that benefits everyone.

The Debt Exchange programme, which was introduced by Finance Minister Ken Ofori-Atta on Monday, December 5, was previously rejected by the Chamber.

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 reject it outright. We indulge contributors to pension funds and actors in the pensions industry to remain calm as we seek the best outcome in our negotiations with the Ministry of Finance,” 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.

“In particular, it does not embed any principal haircut on Eligible Bonds, as we promised. Let me repeat this fact as plainly as I can, in this debt exchange individual holders of domestic bonds are not affected and will not lose the face value of their investments. So let us remove any doubt and discard any speculation that the Government is about to cut your retirement savings or the notional value of your investments.

“That is not the case. As already announced, 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. Individuals who hold bonds will also not be affected at all.

“Our domestic debt operation involves an exchange for new Ghana bonds with a coupon that steps up to 10% as soon as 2025 (with a first interest payment in 2024) and longer average maturity. Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.”

He further stated that “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 annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments will be semi-annual. For emphasis, this domestic debt exchange programme will not affect individual bondholders.

“This domestic debt exchange is part of a more comprehensive agenda to restore debt and financial sustainability. We are also working towards a restructuring of our external indebtedness, which we will announce in due course. This is a key requirement to allow Ghana’s economy to recover as fast as possible from this crisis. This is also a key requirement to secure an IMF support.”

Source: Ekow Coffie