In a statement released, Government and the Coalition of Individual Bondholder Groups (CIBG) – made up of members from the Individual Bondholder’s Forum (IBF) and the Individual Bond Holders Association of Ghana (IBHAG), have announced their efforts to reach a significant agreement to resolve the issue of outstanding domestic debt service payments owed by the government to individual bondholders who did not participate in the voluntary Domestic Debt Exchange (DDE) Programme.
The Ministry of Finance (MoF) and the CIBG signed a Memorandum of Understanding (MoU) that outlines important measures to ease the Government’s liquidity issues and assure on-time bondholder payments.
The MoU, an outcome of extensive discussions and technical-level engagements between the CIBG and the Finance Ministry, acknowledged the increased risk of domestic debt service payments faced by the government due to tightening market conditions.
Notably, the Ghanaian government stopped paying its foreign debt service commitments on December 19, 2022, which made it even more urgent to settle the outstanding debts owed to specific bondholders.
As stated in the agreed terms of the Memorandum of Understanding, the Government commits to completing the payment of coupons in arrears, as of May 31, 2023, by June 30, 2023. This step aims to address the immediate financial needs of bondholders who have been awaiting overdue payments.
Reprofiling of Maturing Bonds
According to the statement, the Government will reprofile the maturing bonds into Treasury Bills (T-Bills) at the current interest rates as they approach maturity, in order to manage them effectively. The outstanding maturing bonds will be distributed among 91-Day, 182-Day, and 364-Day T-Bills in a proportionate manner, with 35% allocated to each of the former two and 30% allocated to the latter.
This approach, it disclosed, aims to balance risk and returns while offering bondholders a diversified range of investment options.
Crucially, the migration of the outstanding maturing bonds into Treasury Bills will follow the existing mechanics of Government securities issuance. This ensures a seamless transition and eliminates any distinction between the reprofiled Treasury Bills and regular Treasury Bills issued by the Government.
The MoU also emphasized the collaborative nature of the agreement, highlighting the need for mutual understanding between the Government and the CIBG.
Both parties commit to working closely together to resolve outstanding issues, prioritize the immediate cash needs of individual bondholders who did not participate in the DDE Programme, and contribute to the restoration of macroeconomic stability and economic recovery.
In accordance with this commitment, the Ministry of Finance will issue an offer memorandum to all individual bondholders who chose to opt out of the DDE Programme, which will ensure transparency and clarity and enable bondholders to make informed decisions about their financial positions.
