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Ghana Battles Economy, Begins Domestic Debt Swap

Finance Minister Ken Ofori-Atta has been under pressure from lawmakers over his fiscal management. Photo: Monica Schipper / GETTY IMAGES NORTH AMERICA/Getty Images via AFP

December 05, (THEWILL) – Ghana, on Monday, commenced a domestic debt swap, where bonds issued locally will be exchanged for new ones.

Ghana Minister for Finance, Ken Ofori-Atta, said, “Under the Programme, domestic bondholders will be asked to exchange their instruments for new ones.

“Existing domestic bonds as of December 1, 2022, will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

“The annual coupon on all of these new bonds will be set at 0 percent in 2023, 5 percent in 2024 and 10 percent from 2025 until maturity. Coupon payments will be semi-annual.

“There will be no haircut on the principal of bonds. Individual holders of bonds will not be affected.

“The Government recognizes that our financial institutions hold a substantial proportion of these bonds. As such, the potential impact of this exchange on the financial sector has been assessed by their respective regulators.”

The debt swap is in line with negotiations with the International Monetary Fund (IMF), to restore macroeconomic stability in the shortest possible time and enable investors to realise the benefits of this Debt Exchange.

Ghana has been plagued by a debt management crisis of $54.4bn, up from $32bn in 2017.

A debt sustainability analysis conducted by the IMF and the World Bank in 2021 put Ghana at high risk of external debt distress.

The IMF projects Ghana’s debt-to-GDP ratio will rise to 90.7 percent by the end of 2022 from 31.3 percent in 2011.

The Cedi has plunged more than 50 percent against the US dollar in 2022.

Inflation in Ghana has hit a 21-year-high, while the central bank lifted the lending rate to 27 percent in November.