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Gabby Otchere-Darko: Debt exchange a necessary evil but give bondholders better deal

Gabby took to his Twitter handle with a series of posts to argue that Ghana has no choice but to take the hard step of restructuring its domestic debt and to appeal to bondholders to sign on to the exchange programme

Story Highlights
  • “I’m sorry but we have to face the hard/painful truths. We ain’t sitting pretty“

The senior partner and co-founder of Africa Legal Associates and leading member of the New Patriotic Party, Gabby Asare Otchere-Darko, has declared that the government’s Domestic Debt Exchange Programme (DDEP) is a necessary evil for the Ghanaian economy that guarantees a better deal for all domestic bondholders in the country.

The NPP strategist published a series of posts on his Twitter handle to express this opinion and to appeal to bondholders to subscribe to the exchange programme in order to save the nation’s economy.

“Ghana is in a very difficult place. What we are seeing with the mobilisation of agitation on individual bondholders poses a real and serious risk worse than what we witnessed when opposition to E-Levy succeeded in derailing an already shaky macroeconomic situation from 2021,” Gabby wrote in his first of four tweets.

“The debt exchange programme is voluntary for individual bondholders but a very necessary evil for our economy. Its success is critical to restoring macroeconomic stability, securing an IMF programme,” said Gabby in his second tweet.

“It hits those of us holding bonds very hard. A straight no to it is no solution. If the no-compromise opposition to it wins, what then has been achieved? It may lead to national debt default.

“So, what then happens to the value of your bonds after! Potentially worthless. If participation is low, we jeopardise resolving the economic crisis and hardships,” the third tweet in the thread read.

Gabby ended his fourth tweet on the exchange programme by stating: “I’m sorry but we have to face the hard/painful truths. We ain’t sitting pretty.“

“Our focus must be on how the burden to individual bondholders may be possibly eased; but not to take the hardline position of simply saying no to participation. It will come back to hit us harder!” he wrote.

DDEP modifications

On Saturday 21 December 2022, the government modified its GHC137.3 billion domestic bond exchange programme to include individuals. The debt exchange programme is among efforts the government is making to restructure the national debt.

The government took the decision to restructure domestic debt step to secure approval from the management and executive board of the International Monetary Fund (IMF) for a US$3 billion loan-support programme to address Ghana’s economic crisis.

A press release issued by the Ministry of Finance said that, in addition to extensions previously set out, the government was “expanding the type of investors that can participate in the exchange to now include individual investors”.

Other modifications to the debt exchange programme include the setting of a non-binding target minimum level of overall participation of 80% of aggregate principal amount outstanding of eligible bonds.

The ministry also said it is “offering accrued and unpaid interest on eligible bonds, and a cash tender fee payment to holders of eligible bonds maturing in 2023”.

There would also be eight new instruments to the composition of the new bonds, making a total of 12 new bonds, one maturing each year starting January 2027 and ending January 2038.

The ministry said the modifications would be set out in full detail in an Amended and restated exchange memorandum, expected to be published in the week of 26 December 2022.

“Conforming changes (including adding and modifying defined terms) in respect of the above amendments and modifications to cure ambiguity, omission, defect, error or inconsistency may be included in the Amended and Restated Exchange Memorandum.” the ministry said.

The government has further extended the deadline for voluntary participation in the debt exchange programme to 24 January 2023 from 16 January.

Wilberforce Asare

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