Finance Minister Ken Ofori-Atta has informed parliament of his intention to present necessary fiscal adjustments to the house in august after the debt operation is completed.

Outstanding revenue mobilisation bills

Already, he said the Income Tax (Amendment) Bill, Excise Duty & Excise Tax Stamp (Amendment) Bills as well as the Growth and Sustainability Levy Bill, are outstanding in Parliament.

According to him, the consideration and approval of fiscal measures by Parliament are critical for recovery from the current economic crisis.

Facilitating IMF Board approval

The Minister therefore entreated Parliament to prioritise the approval of the outstanding revenue mobilisation bills to facilitate the Board Approval for International Monetary Fund (IMF) Programme staff level agreement by the end of March, 2023.

“We are still counting on you for the passage of all the outstanding revenue Bills which are necessary for effective Budget Implementation as well as boosting our efforts at increasing our Tax-to-GDP from less than 13% to the sub-Saharan average of 18,” he stated.

Expected impact of IMF Board approval

He is confident IMF Board approval will restore macro-economic stability, ensure debt sustainability as well as provide critical social protection for the benefit of Ghanaians.

Factors that impacted economy negatively

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.

Broader govt response strategy

Addressing Parliament on the ongoing debt restructuring efforts, Ofori-Atta explained that debt operations are a composite part of a broader government response strategy for addressing the current challenges.

While being optimistic about IMF programme to boost confidence in the economy, he emphasized that complementing it with enhanced domestic mobilisation efforts is critical.

4 out of 5 agreed Prior Actions in the Staff Level Agreement

The Finance Minister averred that the passage of the Bills will enable government to complete four out of five agreed Prior Actions in the Staff Level Agreement.

Agreed Prior Actions already implemented

He noted that tariff adjustment by the Public Utilities Regulatory Commission (PURC), Publication of the Auditor-General’s Report on COVID-19 Spending, and Onboarding of Ghana Education Trust Fund (GETFund), District Assemblies Common Fund (DACF) and Road Fund on the Ghana integrated financial management information system (GIFMIS) have all been completed.

International and domestic bond markets are shut

Ofori-Atta reminded the legislators that the international and domestic bond markets are shut for the financing of government’s programmes, forcing government to rely on the Treasury Bills and concessional loans as the primary sources of financing for the 2023 fiscal year.

Therefore, he called on Parliament to support the government’s financing requests to ensure a smooth recovery from the economic challenges.

He thanked everyone who tendered and supported the Domestic Debt Exchange programme saying “It is a truly remarkable act of sacrifice in our nation’s history. We thank those who heeded our clarion call and took the selfless, patriotic decision to participate. Your names and deeds will never be forgotten. Your timely support is deeply appreciated,”.

He is confident that the programme government has set out for this year, supported by Parliament, will get Ghana out of the economic crisis that has hit the economy since Covid-19.

Inflation interest and exchange rates to stabilise

He hopes for stability in the exchange rates, inflation and interest rates, bringing businesses and families some respite.

Suspension of payments of interest on foreign debt

Government also announced a suspension of all debt service payments for certain categories of external debt, pending an orderly restructuring.

International bondholders

Ofori-Atta revealed that Ghana initiated discussions with representatives of international bondholders and their Advisors.

According to him, substantive discussions are due to start with them in the weeks to come.

G-20 Debt Treatment initiative

Ghana officially asked its bilateral creditors for a Debt Treatment initiative under the G-20 Common framework.

Negotiations with commercial creditors underway

The Finance minister said the process of negotiations have started in good faith with commercial creditors.

Ofori-Atta stated that two preliminary discussions and exchange of information have started on a good footing with representative committees and advisors.

Creditor Committee to assess Ghana’s request

According to him, the members have indicated their commitment to establish a Creditor Committee to assess Ghana’s request for debt treatment under the Common Framework by end February, 2023.

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Government has assured all bondholders, including those who self-exempted from the voluntary Domestic Debt Exchange Programme (DDEP) that it will honour all coupon payments and maturing principals when due.

Payment of coupons and principal for bonds that matured since   February 6 to date (herein referred to as ‘Due Bonds’ remain outstanding.

Bondholders want government to make payments not later than Friday, February 17, 2023.

A statement issued by the Finance Ministry indicates that more than 80% bondholders participated in its $137 billion DDEP.

“The DDEP closed on Friday February 10, 2023, with over 80% participation of eligible bonds,” it said.

The Finance Ministry pledged to honour all coupon payments and maturing principals in addition to commitments to further streamline Government’s expenditures.

“We would like to stress that, all Individual bondholders, especially our Senior Citizens, should rest assured that their coupon payments and maturing principals, like all Government bonds, will be honoured in line with Government’s Fiscal commitments.

“The Government would like to reassure all individual bondholders who elected not to participate that your coupon payments and maturing principals, like all Government bonds, will be honoured in line with Government fiscal commitments,” it added.

Government reiterated that the DDEP had been executed to help protect the economy and enhance Ghana’s capacity to service its public debts effectively, as its debt had become unsustainable.

The alternative for not executing the DDEP would have brought grave disorder in the servicing of our national debt and exacerbated the current economic crisis.

It expressed gratitude to bondholders for the overwhelming participation, adding that their support and contributions had gotten Ghana much closer to securing the International Monetary Fund (IMF) programme.

There are fears that those who opt against signing up are not guaranteed market liquidity for the old bonds, because they are likely to become less tradeable on the secondary market compared with the new bonds.

On the other hand, individuals who sign up for the new bonds will have more certainty even in a changing economic landscape.

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The Member of Parliament for the Bawku Central constituency, Mahama Ayariga, has in a strongly-worded letter, cautioned the Governor of the Bank of Ghana, Ernest Addison, against illegally expropriating the property rights of owners of domestic, private banks.

The letter seeks to address bondholders concerns regarding the Domestic Debt Exchange Programme.

The letter was copied to the Speaker of Parliament, the Attorney General and Minister of Justice, the leadership of Parliament, the Chief Executive Officer (CEO) of the Ghana Bankers Association, the Board Chairmen of all banks in Ghana, the Country Director of the World Bank, as well as the CEO of the Ghana Amalgamated Trust (GAT).

Mahama Ayariga stated that the banks will face capitalization and liquidity problems given that they will not receive timely and appropriate coupon payments from government.

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).

He asserted that the directive of the Minister of Finance, Ken Ofori-Atta, to banks he has emasculated, to approach the Ghana Amalgamated Trust Plc (GAT) for support from the Ghana Financial Stability Fund (GFSF) opens them up to a takeover by investors in the GAT, if the Ghana Financial Stability Fund is not wholly publicly funded.

The Bawku MP further contends that political patronage and nepotism will inform the ultimate purchase of the shares in the private banks, once GAT begins to dispose off these shares to realize the investments made in those banks [if GAT is not publicly funded].

Mahama Ayariga added that the policy and strategic options chosen by the Finance Minister enables the illegal and unconstitutional expropriation of the private property of the present owners of domestic private banks and, possibly, private international banks operating in Ghana.

He called for the mobilization of the available intellectual competencies and political forces to defend the bona fides property rights of owners of private banks in Ghana.

“Not to do so with a sense of urgency will constitute the greatest dereliction of duty of our political class. And the collapse of present owners of these banks and the takeover of these banking interests, similar to what was orchestrated in the PDS saga and the intended ‘Agyapa’ deal, will capriciously, unlawfully and criminally transfer enormous wealth and concentrate it in the hands of those who might enjoy the patronage of the Minister of Finance,” he noted.

This according to him could disorient the nation’s democracy, and potentially destabilize our politics, as the history of the recent banking sector “cleanup” remains fresh in the memory.

Background

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.

The Minister of Finance therefore announced a debt restructuring programme.

Total public debt is GH₵578.7 billion in November 2022 which is unsustainabel.

Total external debt stood at about GH₵383 billion as at November 2022.
Domestic debt constituted GH₵195 billion.

The Domestic Debt Exchange Programme targets 80% threshold of GH₵137 billion.

Ghana Securities Industry Association (GSIA), Ghana Association of Banks and the Ghana Insurers Association have  agreed to participate in the programme for institutional bondholders.

As at October 2022, a breakdown of holdings of bonds are Bank of Ghana – 7%, banks-41%, pensions-19%, securities-5%, insruance-3%, firms and institutions-8%, foreigners-12%, individuals-6%.

Ayariga said “This involves reduced coupons and deferred payments. Definitely, the liquidity, solvency and capitalization of these banks will be negatively affected. This also creates a problem for the financial sector as individual investors will be scared.

Coming after the recent banking sector “cleanup” and the collapse of some banks it generated, people will shy away from depositing their funds in bank accounts. Our entire financial sector is in danger of collapsing.

The letter to the Governor and those copied seeks to point out the danger of the remedial prescription of the Minister for Finance.

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• National honours conferred on COVID-19, ITLOS champions – 15 March 2023
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•  Dr Akoto: With right investment in agric, Ghana will not need IMF  – 14 March 2023