Domestic Debt Exchange: Ofori Atta Says T-Bills Exempted And No Haircut On Bond Principal
Finance Minister Ken Ofori Atta has assured that all treasury bill holders will be paid the full value of their investment on maturity.
He also said there will be no “haircut” on the principal of domestic bondholders and at the same time, individual holders of bonds will not be affected by the domestic debt exchange programme.
He said this during an address to the nation on December 4.
He said these measures put in place by the government are meant to minimise the impact of the domestic debt exchange on investors holding government bonds, particularly small investors, individuals, and other vulnerable groups.
Explaining further, he said, “Under the Programme, domestic bondholders will be asked to exchange their instruments for new ones. 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. 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.”
He added that “The Government recognizes that our financial institutions hold a substantial proportion of these bonds. As such, the potential impact of this exchange on the financial sector has been assessed by their respective regulators.
“Working together, these regulators have put in place appropriate measures and safeguards to minimize the potential impact on the financial sector and to ensure that financial stability is preserved.
“Specifically: The Bank of Ghana, the Securities & Exchange Commission, the National Insurance Commission, and the National Pensions Regulatory Authority will ensure that the impact of the debt operation on your financial institution is minimized, using all regulatory tools available to them.
“A Financial Stability Fund (FSF) is being established by Government with the help of development partners to provide liquidity support to banks, pension funds, insurance companies, fund managers, and collective investment schemes to ensure that they are able to meet their obligations to their clients as they fall due.”
The “no haircut” assurance was first announced in October by President Akufo-Addo while he was addressing the country on the Economy.
“I also want to assure all Ghanaians that no individual or institutional investor, including pension funds, in Government treasury bills or instruments will lose their money, as a result of our ongoing IMF negotiations. There will be no “haircuts”, so I urge all of you to ignore the false rumours, just as, in the banking sector clean-up, Government ensured that the 4.6 million depositors affected by the exercise did not lose their deposits,” President Akufo-Addo said.
The fate of external bondholders will be laid out in due course according to the Finance Minister.
Deputy Minister for Finance, John Kuma last month disclosed the government was adopting a debt restructuring measure that will bring about a 30 per cent haircut on foreign bonds with delayed payment to local bondholders.
“The foreign will take haircut, that is where the haircut comes in. There, we are negotiating to go into their principal, plus suspension of their interest at NPV (net present value) level. We are negotiating on principal of up to 30%,” Kumah said according to Reuters.
This was subsequently rubbished by the Finance Ministry which said the negotiation on debt exchange with the International Monetary Fund was still in progress.
Source: opemsuo.com/Hajara Fuseini
