Debt exchange possible without individual bondholders - Economist

Dr Theo Acheampong, an Economist, says reaching participation agreement with three institutional bondholder groups creates room for government to exempt individual bondholders from the country’s Domestic Debt Exchange Programme.

With the three groups – Ghana Association of Banks, Ghana Insurers Association and the Ghana Securities Industry Association-making up 65 to 70 percent of bondholders participation, he said it was possible for government to have a successful exercise without individual bondholders.

“I think it is possible to conclude this exercise with institutions and not include individual bondholders” he said on a current affairs programme over the weekend.

He indicated that the participation of individual bondholders in the exercise was tricky due to the non availability of safeguards and guarantees as provided to institutions in the form of support through the Ghana Financial Stability Fund and changes to capital requirement reporting, among others.

The lack of incentives to mitigate the impact of the exercise on the individuals, he said could have a dire implication on the wider economy.

Mr Senyo Hosi, Convener for Individual Bondholders Forum, said it was important for government to blend debt operations with fiscal adjustments to create fiscal space to service debts.

The Forum through a joint technical committee made 20 recommendations that largely focused on fiscal readjustments that could help the government make net savings of about GH¢80 billion.

Though most of the recommendations had medium-term targets, he said some were attainable within the year.

"Remember this entire IMF programme and target we are talking about taking debt to 55 percent, it is for 2028. It is not as though government must achieve 55 percent debt target today.

“An argument we may have missed is that even as individuals, we have given government leads that have actually increased tax burden on us,” he added.

On 5th December 2022, the Government of Ghana launched Ghana’s Domestic Debt Exchange programme, an invitation for the voluntary exchange of approximately Dr Theo Acheampong, an Economist, says reaching participation agreement with three institutional bondholder groups creates room for government to exempt individual bondholders from the country’s Domestic Debt Exchange Programme.

With the three groups – Ghana Association of Banks, Ghana Insurers Association and the Ghana Securities Industry Association-making up 65 to 70 percent of bondholders participation, he said it was possible for government to have a successful exercise without individual bondholders.

“I think it is possible to conclude this exercise with institutions and not include individual bondholders” he said on a current affairs programme over the weekend.

He indicated that the participation of individual bondholders in the exercise was tricky due to the non availability of safeguards and guarantees as provided to institutions in the form of support through the Ghana Financial Stability Fund and changes to capital requirement reporting, among others.

The lack of incentives to mitigate the impact of the exercise on the individuals, he said could have a dire implication on the wider economy.

Mr Senyo Hosi, Convener for Individual Bondholders Forum, said it was important for government to blend debt operations with fiscal adjustments to create fiscal space to service debts.

The Forum through a joint technical committee made 20 recommendations that largely focused on fiscal readjustments that could help the government make net savings of about GH¢80 billion.

Though most of the recommendations had medium-term targets, he said some were attainable within the year.

"Remember this entire IMF programme and target we are talking about taking debt to 55 percent, it is for 2028. It is not as though government must achieve 55 percent debt target today.

“An argument we may have missed is that even as individuals, we have given government leads that have actually increased tax burden on us,” he added.

On 5th December 2022, the Government of Ghana launched Ghana’s Domestic Debt Exchange programme, an invitation for the voluntary exchange of approximately GHS137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic.

This is to help the government restructure the economy with GH¢137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, for a package of New Bonds to be issued by the Republic.

This is to help the government restructure the economy with an IMF support programme.