January 27, 2023

Gov’t Reaches Agreement With Insurance Companies On Debt Exchange Programme

The government of Ghana and the Ghana Insurers Association (GIA) have reached a consensus on the participation of Insurance companies in the Domestic Debt Exchange Programme (DDEP).


This was communicated in a joint statement from the Ministry of Finance and the GIA.


In December 2022, when the DDEP was announced by the Ministry of Finance, the GIA called for the exclusion of insurance companies citing threats of collapse.


“According to data from NIC, insurance companies invested over GH¢1.5 billion in deposits with licensed banks and money market mutual funds. Considering the fact that these banks and fund management companies have also invested in government of Ghana securities, the debt exchange will further compound the investment base of the insurance industry, since 40% of our investments are directly exposed to government of Ghana securities an additional 10% exposure from the licensed banks and fund managers will further worsen our situation”, President of the association, Seth Kobla Akwasi said according to Citibusiness news.


But after engagements with the Association, the Ministry of Finance said there has been a consensus.


Under the agreement, “Insurance companies will participate in the Exchange on similar terms as the Banks.

“That the Government through the solvency window of the Ghana Financial Stability Fund (GFSF) will provide support for the insurance companies that are seriously affected by the DDEP. The objective is to protect jobs and the stability of the industry.”


The GIA said it is “happy to reach a deal with the Government that protects its members, but also enabling the Government to push through the necessary economic reforms at this difficult times”.


On December 5, 2022, Finance Minister Ken Ofori Atta announced a domestic debt exchange programme that will transition the country to debt sustainable levels.


He noted that 137 billion of the country’s domestic debt needs to be restructured to get the country’s debt at a sustainable level.

Under the Programme, domestic bondholders are being asked to exchange their instruments for new ones.

Existing domestic bonds as of 1st December 2022 will have to exchange 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.


The offer of the government will end on January 31, 2023 after being extended three times.

The programme was first scheduled to end on Monday, December 19, however, it was extended to December 30 with a contemplated settlement date of Friday, January 6, 2023.


At the time, it was reported that no financial institutions had taken up the offer, but the Finance Ministry said the extension was to help the financial sector secure internal and Executive Board approvals to take up the Exchange offer.


On December 24, the Finance Ministry announced the second extension after excluding pension funds from the programme and including individual bonds.


The programme was then extended to January 16, 2023.


In a tweet on 16 January, the Office of the Finance Minister announced the third extension following opposition by individual bondholders.


He noted that consultation is ongoing and therefore, the expiration for the offer has been extended to the end of January.



Source: opemsuo.com/Hajara Fuseini

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