Ghana to swap domestic debt in fight to regain economic stability
By Christian Akorlie and Cooper Inveen
ACCRA, Dec 4 (Reuters) - Ghana will launch a domestic debt exchange on Monday, its Finance Minister Ken Ofori-Atta said, expressing confidence that the move would help restore macroeconomic stability and end the West African country's worst economic crisis in a generation.
Ofori-Atta said in a video address on Sunday that Ghana's government had finished its debt sustainability analysis, but he did not provide any information on plans for foreign debt that are anxiously awaited by international creditors.
"We are confident that these measures will contribute to restoring macroeconomic stability," he said.
Under the domestic debt exchange, local bonds will be exchanged for new ones maturing in 2027, 2029, 2032 and 2037 and their annual coupon will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.
The government is in talks with the International Monetary Fund for a support programme to relieve its debt distress.
The local cedi currency GHS= has plummeted more than 50% against the dollar in 2022, while the central bank hiked its main lending rate to 27% last Monday after inflation hit a 21-year peak in October.
Ofori-Atta said the government wanted to minimise the impact of the debt swap on small investors so would not apply the terms to Treasury bills or to holders of individual bonds. There will also be no haircut to the principal of the bonds, he said.
"It should ... reinforce expectations that Ghana is on its way to an IMF staff-level agreement. We expect the Ghana cedi to benefit as a result," said Razia Khan, Chief Africa Economist at Standard Chartered.
"There was little question that Ghana needed LCY (local currency debt) coupon reductions to restore macro sustainability. By excluding retail investors, this is likely to be more politically palatable," she added.
How the plan will impact individuals is still to be determined as many hold bonds through mutual and pension funds.
Ofori-Atta said the government would set up a financial stability fund with the support of development partners to help domestic financial institutions, including banks and pension funds, weather the swap.
"I say to you, nothing will be lost, nothing will be missing, and nothing will be broken. We will, together, recover all," he said.
ANALYSIS-Ghana overhaul a test for $1 billion World Bank-backed
Additional reporting by Rachel Savage Writing by Alessandra Prentice Editing by Alexander Smith
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.