Mr. Joe Jackson, the Director of Business Operations at Dalex Finance, has advised institutional bondholders to accept the government’s debt exchange programme.
According to him, despite the throbbing cuts that the fund managers will have to undergo on their bonds, refusing to accept the exchange programme will be more chaotic and extremely punitive for them.
Mr Jackson, who was speaking in an interview opined that, the option by the government to force institutional bondholders to accept the debt exchange is more reasonable than any other alternative.
“Between chaotic default and organised default, I will every time choose organised default. So as I sit here I have to choose this, [because] the alternative is utterly chaotic.”
Joe Jackson
The Director of business at Dalex blamed the country’s current economic woes on excessive borrowing to fund unimportant projects and on consumption by the government.
“If you take Ghana over the last few years, and when we pay salaries and also pay the interest on our debts, all the money we’ve earned is gone. Salaries and interest on our debts consume more than a hundred percent of what we earn.
“The money we spent on Free SHS was what we call deficit financing or borrowed money. They borrowed to build hospitals, borrowed to construct roads, and whiles borrowing is not wrong, you must borrow and spend on projects that will pay for themselves and if you borrow, and you don’t spend on an activity that pays for itself, then, your borrowing is wrong, and you are going to get to some time where you have to pay, and you don’t have enough productivity and income to pay for it.”
Joe Jackson
Debt Exchange Programme
The Minister of Finance, Hon Kenneth Ofori Atta, on Monday December 5, launched the domestic debt exchange programme which requires institutional holders of the eligible bonds to agree in writing to the Central Securities Depository (CSD) to exchange their current holdings for the new ones.
According to the Minister of Finance, investors have up to 4:00 p.m on Monday December 19, to confirm their willingness to participate. Hon Ken noted that the exercise was an avenue for Ghana to bring its debts to sustainable levels in order to be able to qualify for financial support from the International Monetary Fund (IMF).
The Invitation to Exchange is an arrangement through which holders of Eligible Bonds will submit their holdings of Eligible Bonds governed by Ghanaian law and denominated in Ghanaian Cedis (GHS) for new benchmark Government of Ghana bonds with the same aggregate principal amount, and which have in the aggregate a lower average coupon and extended average maturity than the Eligible Bonds.
The alternative to the debt exchange would be a far worse economic crisis, with protracted closure from international markets (including imported goods and services) and further domestic economic instability both for the real economy and the financial sector. It would also mean depleted fiscal resources to support the neediest.
The Minister During the launch noted that “We need the full participation of all bondholders in this transaction. Anything less will not make us eligible for assistance. There can be no exception.”
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