The government, in a new debt restructuring offer, has proposed the inclusion of pension funds.
Minister of Finance Ken Ofori-Atta, in a statement, explained that the new proposal is aimed at “alleviating the cash constraints on the government in the coming years while fully compensating the Pension Funds for the value of their current holdings.”
Mr Ofori-Atta said the proposal has been “crafted to facilitate the execution of the MoU, addressing the government financial needs while maintaining the value of the pension funds.”
“The proposed offer entails exchanging your current holdings of Treasury Bonds, ESLA bonds and Daakye Bonds for a menu of the currently outstanding New Bonds (issued in February 2023 and maturing in 2027 and 2028, respectively.”
“New Bond 2027 and New Bond 2028 featuring an average coupon of 8.4 % with a ratio of 1.15x, thus entailing an increase in patrimonial value,” the statement added.
“This is complemented by an additional cash payment of 10% (strip coupon).”
“The stream of coupons to be received as part of this proposal will therefore be 21% compared to the current 18.5% of the outstanding of old bonds,” the statement said.
It noted: “In 2023 and 2024, both instruments will pay 5% coupon in cash and the remainder will be capitalised into the nominal amount of the two bonds in order to comply with the cash constraints and the macro-framework defined under the programme with International Monetary Fund (IMF).”
The alternative offer has been designed to “achieve the same average maturity as pension funds current holdings of the old bonds (currently between 4 and 5 years), achieve a similar average coupon (currently at 18.5%) while alleviating the cash constraints on the government over the first two years.”
Mr Ofori-Atta, thus, urged the Board of Trustees of pension funds to consider the proposal, indicating that “government is targeting to settle the offer by end of April 2023.”
Earlier, the minister had denied claims a second round of the domestic debt exchange programme was afoot to restructure some GH¢123 billion contrary to media reports to that effect on Thursday, 13 April 2023.
Speaking to journalists in Washington DC on Friday, 14 April 2023, Mr Ofori-Atta said: “No, there is nothing like that”, explaining: “I think that it was a misunderstanding but if you look at it in line with the 22 December [2022] memorandum of understanding that we signed in line with organised labour, pension funds were exempted, as you know, and that has not changed, and, therefore, it is really not correct to say that we are planning a second round of domestic debt exchange with pension funds.”
“But what we are doing is working with them to see how they can help us with the domestic debt service, and we maintain debt sustainability and so those discussions are continuing,” Mr Ofori-Atta explained.
Mr Ofori-Atta also Eurobond holders at an Investors Presentation Forum that Ghana is likely to receive the IMF’s Board approval for a $3 billion bailout by the close of May 2023 because the country has made significant progress in terms of restructuring its debts.
“We do, at this time, expect an IMF board approval in May [2023] and contemplate a rapid negotiation of a Memorandum of Understanding (MoU) with our creditors.”
“We have made significant efforts on all fronts. We hope we could reach an agreement in principle with you our Eurobond holders quickly.”
“We understand this is a challenging time for all of you to commit and offer financial support to all of you. But please be assured we are fully committed to you and your advisors to ensure an equitable solution,” he said.
