Dr Isaac Doku, an Economist and Lecturer at the University of Education, Winneba, has disclosed that deferring principal payments for individual bondholders in government Domestic Debt Exchange programme (DDE) will relieve government of some burden.

According to him, the decision to defer payment will indeed bode well for government. He indicated that the strategy he would have put before bondholders is to first solicit their views and subsequently urge them to allow government to defer their principal payments.

Dr Doku explained that this will enable government pay them their coupon from now up to the next five years.

“Those whose bonds mature from now to the next five years; you now get your principal. But for the coupon, we pay you your coupon anytime you want it for the next five years, so, government suspends all principal payments on all bonds for now. The government will only be paying the principal until the time of maturity. I believe deferring principal payments will reduce some burden for government from now to the next five years.”
Dr Isaac Doku

Dr Doku stated that once the deferrment of the principal payments are undertaken, then government can look into its debt structuring and see what it can do after five years. He expressed the belief that since the debt restructuring is to meet some IMF conditionalities, maybe things may improve in the country to enable government find a way of dealing with its own issues.

“But extending the policy to ten, fifteen years, no, it is too long because most pensioners may not live to see all these things we are talking about.”
Dr Isaac Doku

Speaking in an exclusive interview with Vaultz News, Dr Doku noted that despite government’s decision in its revised conditions that bondholders are free not to participate, he indicated that either way, this is not a fair deal for individual bondholders as they will definitely lose part of their interests and a whole lot of revision is going to be done to their bonds.

Dr. Isaac Doku — Dr Isaac Doku, an Economist

However, he reckoned that if people fail to participate in the domestic exchange, although they are free to decide whether to participate in it or not, after the deadline, the old bonds that they are holding will no longer be recognized.

“So, if you decide to participate in the domestic debt exchange, then you stand the chance of getting some coupons and interest or benefits along the line. But if you want them to value what you have now and pay you at the outgoing [rate] then you should know that you stand the chance of suffering from a serious haircut. You’re going to lose a bigger portion of your investment.”
Dr Isaac Doku

The economist iterated that investors stand a chance of losing a bigger chunk of their investments. Although they will not get a fair deal, he revealed that they’ll be better off buying into the debt exchange programme than not buying into it because they stand a chance to lose a bigger chunk of their investments.

Revised debt exchange terms is an improvement

Elaborating on the offer made individual bondholders in government’s revision of the debt exchange terms, Dr Doku highlighted that the “revision is an improvement over the previous one”. He noted that the fact that the maturity period has been reduced for bondholders within the age bracket of 59 years is a good call.

“… The different coupon rates show that there is a little improvement in the debt exchange programme per the revision as compared to the earlier one. Although there’s a little improvement, it is not the best and we think government can do something better as compared to what we have.”
Dr Isaac Doku

As part of the deal, government proposed that all retirees (including those retiring in 2023) will be offered instruments with a maximum maturity of 5 years, instead of 15 years, and a 15% coupon rate.

Reacting to this, Dr Doku reckoned that the impact of the review will still be detrimental to the survival of pensioners. He believed that since this category of people are vulnerable and considered “high-risk”, they have put all their hopes on the bonds with the anticipation that that’s what they are going to live on.

Furthermore, he indicated that for pensioners to be affected, it is a very big blow to the Ghanaian economy, and it looks like Ghana is gradually becoming a country that thinks little about its senior citizens.

“… To add insult to injury, your hard-earned investment through no fault of yours is getting a haircut and that is going to increase your hardship. That is going to increase the anxiety of the aged… I feel like the debt exchange programme, the aged should be exempted totally because it’s going to be a big disservice to them. Already, the aged are suffering in Ghana.”
Dr Isaac Doku