Debt exchange kicks off – Bonds replaced by 4 new ones, Interest payment deferred to 2024

December 6, 2022 / Comments (0)

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The government has launched a voluntary exercise that allows institutions that hold bonds issued locally in Ghana cedis to postpone their interest on the investments in return for full payment of the principal on a later date.

Although the arrangement promises no interest (coupon) payments in the first year, 2023, interests will be paid the following year at five per cent.

Launching the Ghana Debt Exchange (GDX) programme yesterday, the Minister of Finance, Ken Ofori-Atta, gave an assurance that the programme would not affect the principal investments of bondholders.

“There will be no haircut on the principal of bonds. Individuals who hold bonds will also not be affected at all,” the minister said, adding that efforts were underway to protect the financial sector from any spillover. principal of bonds. Individuals who hold bonds will also not be affected at all,” the minister said, adding that efforts were underway to protect the financial sector from any spillover.

How it works

He explained that holders of all existing bonds as of December 1, this year could voluntarily submit their bonds and go for new ones that would mature in 2027, 2029, 2032 and 2037.

The exercise would affect approximately GH¢137 billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds, he said at a press conference in Accra to launch the programme.

“This is a key requirement to allow Ghana’s economy to recover as fast as possible from this crisis. This is also a key requirement to secure an International Monetary Fund (IMF) support,” Mr Ofori-Atta said.

Four bonds

The Daily Graphic gathered that all the bonds received would be put together and then distributed, per some guidelines, into the four new bonds due to be issued.

Per the allocation formula, the minister said, 17 per cent of the total debt instruments received for the exchange would be allocated to the short-term bonds, maturing in 2027, and another 17 per cent allocated to the intermediate term bond, maturing in 2029.

The third category of medium-term bonds maturing in 2032 will have 25 per cent of the expected GH¢137 billion existing cedi-denominated bonds, while 41 per cent of the bonds will be swapped for long-term bonds, which will mature in 2037.

For the interest rates, technically known as coupons, on the new bonds, Mr Ofori-Atta said the annual coupon on all of the new bonds would be set at zero in 2023 and five per cent in 2024.

However, from 2025, the bonds would attract 10 per cent annual coupons until they matured in 2037, he said.

“Coupon payments will be semi-annual,” the Finance Minister said, adding: “This means the interest payments due for a particular year will be spread in two equal instalments.”

He said the domestic debt exchange was part of a more comprehensive agenda to restore debt and financial sustainability, adding that the government was also working towards a restructuring of external indebtedness, which would be announced in due course.

Government instruments

By law, some investment fund managers and entities are expected to invest heavily in government instruments, such as bonds and treasury bills.

While some of the bondholders are individuals, many others are institutional investors, such as pension funds, fund managers, universal banks, insurance and reinsurance companies.

Therefore, while the arrangement will not directly affect individual bondholders who are not registered in the Ghana Securities Depository (GSD), individuals who belong to collective investment schemes will be affected.

Mr Ofori-Atta said the government would take the necessary steps to safeguard the financial sector from any spillovers.

“Thanks to well-targeted regulatory measures and the creation of a Financial Stability Fund (FSF), banks, pension funds, insurance companies, fund managers and collective investment schemes will be supported to ensure that they are able to meet their obligations to their clients as they fall due,” he said.

He added that the government had dialogued extensively with regulators across the financial sector to agree to provide regulatory forbearance for all entities whose financial positions were adversely affected by virtue of participating in the exchange.

The Daily Graphic also learnt that the forbearance comprised a set of regulatory measures, incentives and leeway that would enable financial institutions to overcome some challenges.

For banks, that can mean relaxing the norms for restructuring assets, so that less provision is made for non-performing assets.

The Daily Graphic again gathered that financial sector regulators, namely: the Bank of Ghana (BoG), the Securities and Exchange Commission (SEC), the National Insurance Commission (NIC) and the National Pensions Regulatory Authority (NPRA), would, in the coming days, take turns to spell out their specific enhancers to the domestic debt exchange programme.

Mr Ofori-Atta said treasury bills were “completely exempted, and all holders will be paid the full value of their investments on maturity”.

Rallying call

The minister indicated that moving the country out of debt could only be achieved through the active participation of all key economic actors.

“We call upon all domestic debt holders to take their share in ensuring that public debt sustainability is quickly restored by participating in this exchange programme,” he said.


The debt sustainability analysis (DSA) conducted by the government and its multilateral development partners demonstrated that Ghana’s public debt is unsustainable, and that the government might not be able to fully service its debt for some time to come if no action was taken.

Debt servicing is now absorbing more than half of total government revenues and almost 70 per cent of tax revenues.

In addition to debts held by state-owned enterprises, exceeds 100 per cent of Gross Domestic Product (GDP).

“This is why we are today announcing the debt exchange which will help in restoring our capacity to service debt. This is the path towards resetting the economy to a more stable one capable of addressing the development challenges of the country,” Mr Ofori-Atta said.


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