Ghana claims domestic debt exchange success amid doubts

By Jonas Nyabor

Posted on Wednesday, 15 February 2023 11:09
FILE PHOTO: A man trades US dollars for Ghanaian cedis at a currency exchange office in Accra, Ghana, June 15, 2015. REUTERS

Ghana’s government announced on Valentine’s Day that it had achieved about 85% participation rate in the controversial domestic debt exchange programme, with observers raising doubts over such a percentage.

The participation rate means that the West African nation has made significant progress towards getting an IMF board approval for a $3bn bailout to rescue its troubled economy, even though external debt is still an unsolved challenge. 

Settling domestic debt hasn’t been a smooth ride – widespread protests by individual bondholders and corporate groups have characterised the programme since its launch in December 2022.  

The government was forced to extend the deadline for voluntary acceptance of the programme five times and vary the original proposal owing to low subscription. 

“The alternative of not executing the DDEP [domestic debt exchange programme] would have brought grave disorder in the servicing of our national debt and exacerbated the current economic crisis,” says a statement released by the finance ministry on Tuesday. 

“The government is therefore grateful for the overwhelming participation of all bondholders. Your support and contributions have gotten your country much closer to securing the IMF programme.” 

Cooked numbers?

The government’s sudden success claims, especially after massive holdouts earlier, is raising eyebrows.  

The veil on details, such as the total number of persons and groups that have signed up for the debt swap programme, has made it more difficult to accept. 

Analysts like IMANI Africa’s Bright Simons are hanging allegations of cooked figures on the neck of the finance ministry.  

“[The] government of Ghana is trying to change longstanding methods of calculating participation rate in debt exchanges by altering the denominator of total principal,” he says. “The government of Ghana has decided to choose its own arbitrary number for tendered outstanding principal & declared an 80%+ participation rate.” 

An opposition member of parliament also raised questions. “[The] government has not been able to provide data on the actual number of investors involved in the Domestic Debt Exchange Programme. Yet this government magically says that the number of willing participants is exactly 80%. Where did it obtain that percentage?” says Rockson-Nelson Dafeamekpor.   

Economist Theophilus Acheampong contends that the government should be posting a success rate of 61% in the face of the GH¢137.3bn ($11.2bn) total eligible domestic debts. 

“There’s a funny accounting gimmick being deployed by the Ghana Government to make it look like it got 85% participation in its just concluded domestic debt exchange programme. If the initial DDEP amount of GHS137bn is considered, the actual exchange amounts to 61%, as many observers highlighted from the get-go,” he says.  

The government had earmarked GH¢137.3bn of the domestic debt for the exchange deal last year, but ended up tendering GH¢97.7bn after exempting pension funds.  

Protests remain

Retirees holding domestic bonds have been picketing at the finance ministry since last week to demand an exemption from the programme, but the government has been adamant.  

“The challenge we have is that we need to, by the middle or end of March, have concluded with our IMF programme; and this – the debt exchange – is an important part of that process. The cost of our disagreement may be that we will not get an IMF clearance; and then the issues of inflation and capacity to pay take on a different hue,” the finance minister, Ken Ofori-Atta, told journalists in Accra. 

The feat on the domestic debt exchange is good news, but now attention must be focused on the external debts to see how Ghana can get their buy-in into such a program.

The programme’s most recently revised terms offer persons above the age of 60 a coupon rate of 15%, down from an average of 18.5%, for bonds with five-year maturity periods. People under the age of 59 are being offered a 10% coupon rate. 

The convener of the pensioners’ group and former director of Ghana’s securities and exchange commission, Adu Anane Antwi, tells The Africa Report that “for pensioners we are saying exempt us totally from the programme”. 

“If the issuer exempts you, it is far better than you self-exempting. We didn’t tender our bonds so we have self-exempted, but we want the government to officially declare us not to be part of the program,” he says. 

External debt puzzle

In January, Ghana joined Ethiopia, Chad, and Zambia to request to restructure its bilateral debt under the G20 Common Framework. As the lenders begin to form a committee to begin the debt relief talks, the West African country is seeking the inclusion of China.

China is Ghana’s biggest bilateral creditor. Of its $28.4bn external debts, $1.7bn is owed to China compared with $1.9bn owed to Paris Club members.  

A lecturer at the University of Cape Coast School of Business, Seyram Kawor, told Accra-based Joy News that negotiations with external creditors will not be a walk in the park, but remains key to securing the bailout.  

“The feat on the domestic debt exchange is good news, but now attention must be focused on the external debts to see how Ghana can get their buy-in into such a program. This will be tough, but if we do this successfully, we are good to go to the IMF board to affirm the bailout deal,” he said.  

“We now have our relations with the Paris Club and the common framework, and we are looking for – as quickly as possible – a creditor committee to be established, so we will have the body with whom we can engage to bring those discussions as quickly as possible.”

Ghana has already found an ally in Germany to push its bid to get Beijing to join the external debt relief program.   

Germany’s Finance Minister Christian Lindner was in Accra last week and top of the government’s agenda for Ghana was to get Germany as an ally to push the campaign for acceptance of its debt relief talks.   

“We have good relations with China. We will like you to encourage China to participate in these programmes as quickly as possible…A very important consideration for us is the financial stability fund that has been promised us as one of the key outcomes of these negotiations and definitely once again, your voice in trying to bring that into being is something that we would appreciate very much,” President Akufo-Addo told Lindner. 

Lidner subsequently at a news conference with his Ghanaian counterpart Ken Ofori-Atta asked China and Ghana’s other creditors to “join the efforts as swiftly as possible […] I remind China of its responsibilities as a very important bilateral creditor of Ghana”.

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