GOVERNMENT OF GHANA DOMESTIC DEBTS DEFAULT
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Ghana restructures its debt in order to be eligible for a loan from the International Monetary Fund as it requests that local bondholders endure interest payment losses.
Finance minister Ken Ofori-Atta in a Facebook post on Sunday, 04/12/2022 indicated four new bonds with maturities of 2027, 2029, 2032, and 2037 will replace the nation’s current local currency debt.
He said, “The annual coupon on all these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity,” he said in the video posted late Sunday on the Ministry of Information’s page. Coupon payments will be semi-annual.
“There will be no haircut on the principals of bonds and external debt restructuring parameters will be presented in due course,”
Ghana is currently in a negotiation with the International Monetary Fund over a $3 billion deal after being excluded from the international debt markets due to selloff of its dollar bonds that drove rates to distressed levels.
This year, the cedi has had the poorest performance globally against the dollar, their cost of servicing these loans has increased.
According to an article cited by Bloomberg, domestically sold local currency bonds totaling 43.5 billion cedis($3.5 billion) are due to mature at the end of June. Additionally, it has $663 million in dollar-denominated coupon payments.
This move is likely to have the most impact on Ghanaian lenders because they held the largest percentage of outstanding government bonds at the end of August, accounting for 32% of all investor groupings, this is according to information gathered from the Central Securities Depository Ghana LTD.
Ken Ofori Atta intimated that to protect private investors and small investors, treasury bills will be excluded in the restructuring of local debt
According to the Finance minister, the Central Bank and other financial regulators would ensure that impact is “minimized.” He further disclosed that the government is also creating a financial stability fund alongside aid organizations to support banks, pension funds, insurance firms, fund managers, and collective investment schemes with liquidity.
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1 Comment
This government must look out for a more effective and less aggressive way of restructuring our debts
In that way our local banks will have the capacity to be stable and run their business successfully.
As for the haircut is heating everyone. Is a lie by the sector minister that individuals will not be affected.
If you invest in a bank let’s say a mutual fund or a Tb, and that bank has a government bond your investments will as well be affected since the banks may not be able to pay to full length the individual investors. The haircuts will hit you no matter the investment.