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The government is actively seeking the full participation of all investors in its dollar-denominated bonds as part of its efforts to restructure debts totaling approximately US$809 million.
The successful completion of this crucial aspect of the domestic debt exchange program is vital for Ghana’s objective of restoring debt sustainability, a critical element of the IMF program. According to a draft memorandum of the invitation, the government plans to exchange two dollar-denominated bonds maturing in November 2023 and November 2026 with new bonds that will mature in 2027 and 2028.
The new bonds will carry a reduced coupon rate of 2.75% and 3.25% compared to the previous rates of 4.75% and 6% offered for the old bonds. A memorandum released on July 14 clarified that the invitation to exchange would not involve any reduction in the principal amount of eligible bonds.
It also emphasized that the Republic retains the sole discretion to settle the eligible bonds in whole or part. Participation in receiving the new bonds is voluntary for eligible holders.
The Ministry of Finance issued a statement highlighting the critical role of completing this domestic debt exchange in the debt reduction program and the program discussions with the International Monetary Fund (IMF).
“It will unlock the international community’s support and enable Ghana to achieve its debt targets,” stated the release. The government, therefore, urges all holders of Eligible Bonds to participate fully.
Ghana’s economy has faced significant challenges in the past two years, including a 22-year high inflation rate of 54.1% in December 2022 and an unsustainable public debt of GH¢575.7 billion, equivalent to 93.5% of the country’s GDP.
In July 2022, the government formally approached the IMF for a fund program and obtained a staff-level agreement in December. However, the approval at the Executive Board level, which would facilitate the disbursement of the US$3 billion support, was contingent upon the country’s ability to restructure its domestic and external debt.
Following opposition from stakeholders, the government announced the Domestic Debt Exchange Program in December, but it took months of negotiations to reach an agreement with domestic debtors.
The DDEP involved the exchange of GH¢82 billion worth of old bonds for 12 new ones with reduced coupon rates and more extended maturity periods. Despite progress made, the government has recently indicated that the domestic debt restructuring is incomplete, as it seeks to restructure cocoa bills and US dollar-denominated bonds.
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Source: Omanghana.com
