How Ghana’s Domestic Exchange Affects Investors

Honorary Vice President of IMANI Africa, Bright Simons, has stated investors are highly to bear the brunt of the current structure of the debt exchange programme.

 

Speaking in an interview on JoyNews’ Newsfile on Saturday, he explained that investors in the country are likely to lose more in debt programme compared to another debt restructuring worldwide.

 

He added that Ghana is trying to restructure a bigger chunk of its debt. About 65 % compared to other countries that have gone through a debt restructuring programme.

“Our domestic debt exchange also actually affects investors more heftily.. in simple terms, we are asking investors to do way more than most countries have asked in circumstances like this.

“It means therefore that losses to investors are much lower than what investors nowadays are used to seeing. The average nowadays in the last 10 years is 63 % of recovering but we are in a situation where investors will get about 35% back,” he said.

 

According to Mr Simon, due high inflation rate in the country, some investors are estimating a loss of up to 77 per cent.

 

“I have seen local investors take their portfolios and show 88 per cent so it is huge and massive. We are talking about countries like Jamaica which we try to compare with doing about 10 to 15% MPV loss, 8.6%. Nicaragua doing about 25% etc so we are on the high range in terms of how much investors are going to lose.”

It would be recalled that government introduced and launched a debt exchange programme in its bid to rescue the economy and secure a deal with the International Monetary Fund (IMF).

 

Per the deal, all bondholders will not receive any interest on their bonds for the 2023 financial year.

 

The payment of dividends, according to government is likely to begin next year, 2024 at a discounted rate of 5%.

In relation to this, bondholders who may want to transfer their bonds will not be able to get the full principal they initially invested as bonds.

 

But this proposal has seen a mass rejection by bondholders asking to be exempted from the programme.

Meanwhile, the Finance Minister has assured vulnerable people who are bondholders of the government’s protection under the debt exchange programme.

According to him, those who are less vulnerable will be made to contribute more under the programme.

 

“ ..some are more vulnerable than others and, therefore, some will contribute more than others, but we will find a way to get a formula that protects the most vulnerable and ensure that we are still able to secure an agreement with the fund in a way which would have an orderly adjustment to our macro’s, our fiscals and build a strong economy,” Mr Ofori-Atta said.

 

He gave this assurance in an address to the press before a closed-door meeting with leaders of the Individual Bondholders Forum on Wednesday.