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Reading: Ghana swaps domestic debt for economic stability
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Africa

Ghana swaps domestic debt for economic stability

 Ghana will begin trading domestic debt on Monday, according to Finance Minister Ken Ofori-announcement. Atta's He believes that doing this ...

Chima Joseph Ugo
Chima Joseph Ugo - Editor-in-chief December 05, 2022
Updated December 5, 2022 at 9:16 AM
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Ghana swaps domestic debt for economic stability
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Ghana swaps domestic debt for economic stability
 Ghana will begin trading domestic debt on Monday, according to Finance Minister Ken Ofori-announcement. Atta's He believes that doing this will aid the nation of West Africa in overcoming its greatest economic crisis in a generation.

Ofori-Atta said that the Ghanaian government had finished a debt sustainability review in a video speech on Sunday. However, he made no specific comments on how the nation intended to handle its massive foreign debt.

He declared, "We are optimistic that these steps will help to restore macroeconomic stability.

Holders of 2023 bonds will receive 2024 bonds with a 5% coupon, 2025 bonds with a 10% coupon, and 2026 bonds with a 10% coupon as part of the domestic debt swap.

Regarding a potential aid programme to lessen the nation's debt load, the administration has contacted the International Monetary Fund.

The central bank raised its benchmark lending rate to 27% on Monday due to inflation reaching a 21-year high in October. In the meantime, the value of the local cedi against the dollar has decreased by more than 50% in 2022.

Ofori-Atta claims that in order to alleviate the impact on small investors, the government will not apply the terms of the debt exchange to holders of Treasury bills or individual bonds. Additionally, he gave investors his word that the bond's principal would not change.

"It should... confirm that Ghana is approaching an agreement at the staff level of the IMF. Accordingly, we anticipate that the Ghana cedi would gain," said Razia Khan, Chief Africa Economist at Standard Chartered.

"Restoring macro sustainability in Ghana required LCY (local currency debt) coupon reductions, which was not in doubt. This is perhaps more politically acceptable by excluding retail investors," she remarked.

It is unknown how the proposal will impact each individual because many people have bonds through mutual and pension funds.

Ofori-Atta declared that the government will create a financial stability fund with the aid of development partners to enable domestic financial institutions, such as banks and pension funds, weather the swap.

"I assure you that there won't be any misplaced, missing, or broken items. Together, we shall reclaim everything, he said.

Tags: Africa

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