Joe Jackson, the Director of Business Operations at Dalex Finance, has warned that if government does not expedite the debt exchange negotiations by the end of January 2023, Ghana will be heading for “doomsday”.
Mr Jackson emphasized the need for the government to alter its approach and effectively communicate with bondholders in order to get them to accept the debt exchange program.
“In my mind, by the end of this month, it should have been tied up, it is hard to imagine going into February without this issue being resolved then we will be heading into the doomsday scenario.”
Mr. Jackson
The international market is currently showing leniency towards Ghana due to the recent stability of the economy, as evidenced by the staff-level agreement with the International Monetary Fund, Mr. Jackson added. However, he stressed the importance of addressing the debt exchange negotiations promptly in order to maintain this favourable position.
“The reason why the markets haven’t punished Ghana as badly as they could have punished us is that there is a sense that the IMF will come in and provide some stability…but we then need to negotiate with all these constituencies that we are asking to take a haircut, and it has to be voluntary.
“So we are walking on a knife edge, and we have to come to a conclusion very soon. I don’t think that there is a lot of time at all.”
Joe Jackson
Prior to this, Ghana has twice extended the deadline for its domestic debt exchange program, first to December 30 and then to January 16, in order to allow time for ‘securing internal approvals’ from the financial sector and considering suggestions from stakeholders.
The Finance Ministry has also announced that the debt exchange will now include eight additional instruments, bringing the total number of new bonds to 12 with maturities ranging from 2027 to 2038.
Under the original plan, local bonds were to be exchanged for new ones with maturities ranging from 2027 to 2037 and annual coupons of 0% in 2023, 5% in 2024, and 10% from 2025 until maturity.”
Government pays 18.5% interest on 2-year treasury note
The government has made a coupon payment on a treasury note with an interest rate of 18.5%, even though it has announced a debt restructuring program that will impact interest payments in 2023.
This payment was reportedly made because the domestic debt exchange has not yet been fully implemented.
The debt restructuring program, which was previously postponed and has a current deadline of January 16, 2023, is expected to affect interest payments on government debt instruments.
According to the amended Debt Exchange Memorandum, holders of eligible bonds who submit valid offers will receive a principal amount of new bonds, calculated using specific exchange consideration ratios, as well as accrued interest and, for eligible 2023 bonds, an additional tender fee. This exchange is set to take place on the settlement date.
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