Govt, banks reach agreement on domestic debt exchange

Government and the Ghana Association of Banks (GAB) struck a deal in which government will pay 5% coupon for 2023 under Domestic Debt Exchange Programme (DDEP).

Single coupon rate for 12 new bonds

In addition, a single coupon rate will be paid for each of the 12 new bonds.

9% coupon rate

This will effectively result in a coupon rate of 9%.

Clarity required on GH₵15bn Ghana Financial Stability Fund

Per the deal, government is to provide clarity on the operational framework and terms of access to the GH₵15 billion Ghana Financial Stability Fund (GFSF).

Sole discretion to vary the terms to be amended

Under the agreement, the government is to remove or amend all clauses in the Exchange Memorandum that empowers the government to, at its sole discretion, vary the terms of the Exchange.

GAB sets January 30, 2023 deadline

GAB acknowledged the progress made and noted that participation of its member banks in the DDEP, per the new terms, is subject to each individual bank’s internal governance and approval processes but, in any case, not later than January 30, 2023.

This is a significant milestone towards addressing the country’s economic challenges, and will thus help to restore macro-economic stability and accelerate Ghana’s economic growth.

With this achievement, the Government of Ghana reiterates its commitment to concluding the DDEP in time with all other stakeholders.

External factors that negatively affected the economy

COVID-19, Russia-Ukraine war, soaring energy and food prices, higher interest rates, a strong dollar and a global slowdown negatively affected the economy.

Ghana seeking $3 billion loan

Ghana and the International Monetary Fund (IMF) have reached staff-level agreement on economic policies and reforms to be supported by a new three-year arrangement under the Extended Credit Facility (ECF) of about $3 billion.

But, the IMF has made it clear that the Board approval of the deal is contingent on a successful debt exchange programme.

Under the original plan of the domestic debt exchange programme, local bonds were to be exchanged for new ones maturing in 2027, 2029, 2032 and 2037, with annual coupons set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.

Government later modified the terms including eight additional instruments to be created, bringing the total number of new bonds to 12, with one maturing each year from 2027 to 2038.

Following the inclusion of pension funds, outcry by labour and advocacy groups, led government to exempt pension funds from the programme.

Despite their initial exemption, individual bondholders have also been included in the programme.

The Government has embarked on a series of stakeholder engagements, to reach consensus with affected groups, on the terms of their participation in the Domestic Debt Exchange Programme.