Ghana extends Domestic Debt Exchange Programme deadline to Feb 7
Francis Kyei, Senior Market Analyst
The Government of Ghana has extended the deadline for the Domestic Debt Exchange Programme (DDEP) to February 7, 2023, from January 31, to allow for more participation in the programme.
A statement from Ghana’s Ministry of Finance indicated that a revised and final Exchange Memorandum will be released by Thursday February 2. Ghana is also in discussion with organised labour and pension fund trustees on a separate arrangement.
Since the introduction of the DDEP on December 5, 2022, the deadline has been extended on more than two occasions. The original programme has also been amended to address the concerns of stakeholders.
The Government of Ghana is making frantic efforts to secure at least 80% participation rate. So far, the government has managed to convince the Ghana Association of Banks, the Ghana Securities Industry Association, and the Ghana Insurance Association to participate in the programme.
However, individual bondholders, hundreds of thousands in number, have refused to sign on to the programme. The extended deadline will give the Ghanaian government enough time to engage individual bondholders again on the programme, through their representative body known as the Individual Bondholders Forum (IBF)
Ghana’s Finance Minister, Ken Ofori-Atta, remain optimistic that the country will close a deal with the capital market players to attain 80% participation.
Ghana needs to restructure its debts (both local and foreign) as part of the conditions to secure a US$3 billion External Credit Facility (ECF) from the IMF.
A debt sustainability analysis (DSA) using the IMF DSA framework indicates that Ghana’s public debt is high and unsustainable. The analysis shows that the PV of the debt-to-GDP ratio is over 100% against a debt sustainability threshold of 55%.
This means that to achieve debt sustainability, Ghana must reduce the debt-to-GDP ratio in present value terms by at least 45 percentage points (ppt) in the medium term.
On external debt restructuring, Ghana has made a request to the G20 group to restructure its bilateral debts. The country is yet to present a proposal to Eurobond holders for consideration.
Ghana’s Eurobonds are fluctuating over sentiments that a greater burden of the country’s debt restructuring will fall on external creditors. The country has defaulted coupon payments on its Eurobond maturing January 2026.
Eurobond holders are observing the developments with the domestic debt restructuring. Sources say Ghana is proposing a 30% cut on the face value of its Eurobonds, a three-year zero-coupon payment, and 30% cut on coupon payments after the three-year freeze on coupons.
Disclaimer: This article has been prepared by GFX Prime, an African investment firm with its registered office on the 2nd Floor, PWC Towers, Cantonments City, Accra Ghana. This article has been issued for information purposes only. GFX Prime does not recommend or propose that any security referred to in this article is appropriate or suitable for your investment objectives or financial needs.
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