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DDEP: No “haircuts” on principal of bonds, says Ken Ofori-Atta

The government’s commitment to Ghanaians and the investor community, in line with its negotiations with the IMF, is to restore macroeconomic stability

The Minister for Finance, Ken Ofori-Atta, has declared that there will be no “haircuts” on the principal of bonds as the government implements its Domestic Debt Exchange Programme (DDEP). The DDEP will roll out in 2023, just one of a raft of efforts aimed at restructuring Ghana’s debt.

In a brief announcement on Sunday 4 December 2022, before the official disclosure of the debt operation programme on Monday 5 December 2022, the Finance Minister said that the government’s “commitment to Ghanaians and the investor community, in line with negotiations with the IMF, is to restore macroeconomic stability in the shortest possible time and enable investors to realise the benefits of this debt exchange”.

“The Government of Ghana has been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds, particularly small investors, individuals, and other vulnerable groups.

“In line with this: treasury bills are completely exempted and all holders will be paid the full value of their investments on maturity. There will be NO haircut on the principal of bonds and individual holders of bonds will not be affected,” Ofori-Atta said.

Specific measures

According to the Finance Minister, the government “recognises that financial institutions” in Ghana “hold a substantial proportion of these bonds” and, as such, “the potential impact of this exchange on the financial sector has been assessed by their respective regulators”.

He said that, “Working together, [the] regulators have put in place appropriate measures and safeguards to minimise the potential impact on the financial sector and to ensure that financial stability is preserved.

“Specifically, the Bank of Ghana, the Securities and Exchange Commission, the National Insurance Commission and the National Pensions Regulatory Authority will ensure that the impact of the debt operation on your financial institution is minimised, using all regulatory tools available to them,” the Finance Minister said.

“A Financial Stability Fund (FSF) is being established by the government with the help of development partners to provide liquidity support to banks, pension funds, insurance companies, fund managers, and collective investment schemes to ensure that they are able to meet their obligations to their clients as they fall due,” he said.

Support of Ghanaians

The Finance Minister’s statement recognised that “these are difficult times”. He therefore solicited “the support of all Ghanaians and the investor community to make the exercise successful”.

“We are confident that these measures will contribute to restoring macroeconomic stability,” Ofori-Atta said.

“With your understanding and support, and that of the entire investor community, we shall overcome our current difficulties and, with the help of God, put our economy back on the path of renewed and robust growth,” he said.

Click on the link below to listen to the Minister for Finance, Ken Ofori-Atta:

Wilberforce Asare

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