Ghana: Exemption From Debt Exchange Programme Not an Option ... Finance Ministry Tells Insurers

14 January 2023

The hopes of members of the Ghana Insurance Association of being excluded from the Debt Exchange Programme will not materialise.

This is because the Finance Ministry in a letter to the Association signed by the Minister, Ken Ofori-Atta, and sighted by categorically said an exemption was not an option for the group.

The association in December last year wrote to the Ministry demanding an exemption from the programme.

According to its president, Seth Kobla Aklasi, 40 per cent of its total assets for the Quarter 3 of 2022 were invested in government of Ghana'ssecurities; hence any attempt to give its members a "haircut" would worsen the situation.

However, the Finance Ministry, in response to the group, explained that based on feedback from industry players, it had made some significant adjustments to the programme and would not exempt insurers.

"Based on your letter and the feedback from you and other industry associations, the government, working with its advisors, has made significant enhancements to the terms of the exchange instruments to address key concerns raised about accrued interest and zero coupons for 2023. The government has also improved the commercial terms of the exchange instruments; details were announced on December 24, 2022," the letter said.

"In this regard, the government encourages a positive response from the industry to enable us to complete the exercise in the interest of the broader economy. In our meeting... you made it very clear, the peculiar nature of your industry and therefore the forbearance required; an exemption, however, is not an option," parts of the letter read.

The government after securing a $3 billion staff-level agreement with the International Monetary Fund (IMF) was struggling to restructure its debt, a requirement for approval of the IMF programme.

With much effort to stabilise its debt, the government announced a Debt Exchange Programme in December, which it said would affect local bonds, individual investors and international bondholders.

The government said local bonds were to be exchanged for new ones maturing in 2027, 2029, 2032 and 2037, with annual coupons set at zero per cent in 2023, 5 per cent in 2024 and 10 per cent from 2025 until maturity.

The government had to postpone the deadline on three occasions after groups involved in the programme opposed the debt sustainability with fears of a 'haircut' on investments.

A new date of January 16 was set as the deadline for registration unto the programme after pension funds were excluded from the programme and individual bondholders included.

The government then made some modifications to the programme, including an increase in the New Bonds offered by adding eight new instruments to the composition of the New Bonds for a total of 12 New Bonds, one maturing each year starting January 2027 and ending January 2038.

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