Debt Exchange Programme: Gov’t reaches agreement with banks on new terms

The government of Ghana and the Ghana Association of Banks (GAB) have come to a consensus on the terms of participation of banks in the Domestic Debt Exchange Programme (DDEP).

The new arrangement addresses final improvements to the terms of the programme.

These include; an agreement to pay a 5% coupon for 2023 and a single coupon rate for each of the twelve (12) new bonds resulting in an effective coupon rate of 9%, clarity on the operational framework and terms of access to the Ghana Financial Stability Fund (GFSF) and the removal or amendment of all clauses in the exchange memorandum that empowers the republic to, at its sole discretion, vary the terms of the exchange.

This was contained in a joint statement from the Finance Ministry and GAB issued on January 23.

The GAB said per the new terms, the participation of member banks is subjected to individual banks’ internal governance and approval processes.

However, GAB said the member bank’s participation, in any case, should not be later than the deadline date of January 30.

“This is a significant milestone towards addressing our economic challenges and will thus help to restore macro-economic stability and accelerate Ghana’s economic growth. With this achievement, the Government of Ghana reiterates its commitment to concluding the DDEP in time with all other stakeholders,” a portion of the statement read.

Ghana’s Domestic Debt Exchange Programme is intended to place the country’s debt on a sustainable path.

The debt restructuring will see a slash in interest payments for domestic bondholders to zero percent in 2023 and five percent in 2024.

Existing domestic bonds as of December 1, 2022, will also be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037 – all in a bid of restoring the nation’s capacity to service its debt.

Under the programme, however, treasury bills and individual bondholders will not be affected while there will be no ‘haircuts’ on the principal of bonds, government said.