Di domestic debt exchange programme wey Ghana govment announce and how dis go affect investor money

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Ghana govment dey ask local bond holders to accept losses on interest payments as part of move to restructure dia debt so say dem go fit secure loan facility from International Monetary Fund (IMF).

Finance Minister, Ken Ofori Atta announce de launch of de Ghana Domestic Exchange Programme in order to reduce de impact of economic hardship on investors wey dey hold govment bonds.

Existing domestic bonds as of December 1, 2022 go be exchanged for four new bond maturity period.

Under de new debt exchange programme, govment dey ask bondholders to exchange dia instruments for new ones which go mature in 2027, 2029, 2032 Dem 2037.

“De annual coupon on all dis new bonds go dey at 0% in 2023, 5% in 2024 den 10% in 2025 until dem mature” Ken Ofori Atta reveal.

According to de Finance Minister, dis be part of measures to help restore economic confidence in de Ghanaian market.

But what be dis debt exchange programme in lay terms and how dis dey affect Ghanaian bond holders?

Debt exchange programme explained

According to Policy analyst, Bright Simmons, dis be de first time since 1982 where govment default on payment of bonds.

De reason govment dey introduce new bond maturity periods be sake of dem no get enough money to settle matured bonds.

Again, if govment use all dia monies to sort out bonds wey mature, den dis go create more economic hardship for Ghana.

Sake of instead of using de limited monies for running de economy, govment go rather take am sort dis financial instruments.

Dis go make Ghana unattractive for bailouts from institutions like de IMF who dey against using limited resources to service commercial loans.

So what govment do be say instead of paying matured bonds, dem postpone de payment to four new periods in 2027, 2029, 2032 den 2037.

0% interest rate in 2023, 5% in 2024 explained

According to Deputy Finance Minister, John Kumah based on de current bonds wey exist, “if you get like Ghc100 wey you want collect am today, you go fit lose 40% on dat based on de marked to market value.”

“Even though you get Ghc100, you go lose about 40%, but by de end of next year dem go restore de value of your money to 100% sake of de interventions den arrangements wey dey go on” he add.

So even though govment dey talk say you go get 0% on your interest payments, in de end, dem dey work to improve de value of your investment which dem go restore to investors by end of de year.

How Ghana move from best to worst performing currency in two years

In February 2020, Global financial news, research and data organisation Bloomberg report say Ghana cedi be de best performing currency against de US dollar in de world for start of 2020.

During dis time, Bloomberg report say de currency of Ghana, de world’s second-biggest cocoa producer strengthen by 3.9% in 2020, de strongest in over 140 currencies wey dem dey track. 

Dem explain say dis be massive turnaround from 2019 when de Ghana cedi weaken by up to 13%.

Fast forward two years later, de cedi move from best performing currency to de worst.

Ghanaian Economist, Professor Godfred Bokpin believe say govment bring dis on dia self.

“Dem delay in reaching out to de IMF, like dem for make de call last year. At de beginning of dis year, we insist say govment for make de call to IMF sake of dem dey move dangerously,” he add.

What happen during dia delay be say little assurance dey in terms of fiscal sustainability which one go fit deduce from de 2022 budget.

He explain say govment no get de monies to support dia 2022 budget, something which make dem start dey find ways to generate money locally like through de electronic transactions levy.

Dia failure to recognize de need to go to IMF on time cause de devastation which Ghana dey go through right now.

Ghana currently dey in talks wit IMF for $3 billion bailout.