The success of the government’s domestic debt exchange programme has further been hit a massive setback following its outright rejection by the Ghana Securities Industry Association (GSIA).
Announcing its rejection of the programme in a press statement sighted by the Business and Financial Times (B&FT), GSIA said: “We, at the GSIA understand the difficult crossroads at which our nation currently finds itself and the difficult choices that need to be made to set us on the path to debt sustainability.
“However, we are unable to accept the bond exchange program announced by the Minister of Finance in its present form.”
WAY FORWARD: GSIA is, therefore, planning to engage the Ministry of Finance on its “concerns and reservations.”
“We, therefore, urge the investing public to continue to have confidence in us as we pursue this process. In this vein we entreat clients of our member firms to allow us to engage and then communicate the outcomes to enable them take the best decision on their investments,” the Association added.
Government’s expectation
Meanwhile, the finance minister argues that the programme will be a necessary tool to recalibrate the prevailing interest rate regime and return the country’s debt situation to more sustainable levels.
He, therefore, called on holders of domestic debt to voluntarily exchange approximately GH¢137billion of the domestic notes and bonds – including E.S.L.A. and Daakye bonds – for a package of new bonds to be issued by the Treasury.
Currently, the Debt Sustainability Analysis (DSA) demonstrates that the country’s debt servicing absorbs more than half of total government revenues and almost 70 percent of tax revenues. Additionally, the total public debt stock, including that of State-Owned Enterprises among others, exceeds 100 percent of gross domestic product (GDP).
Below is the full press statement
GOVERNMENT OF GHANA DOMESTIC DEBT EXCHANGE
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On July 1, 2022, when the Government of Ghana (“GoG”) announced that it would seek an International Monetary Fund (“IMF”) program, we were informed that GoG would conduct a Debt Sustainability Analysis and potentially restructure its debt as a pre-condition for accessing the IMF program.
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The Ghana Securities Industry Association (“GSIA”) was engaged on the proposed program and subsequently, a 5-Member Consultative Committee on financial sector stakeholder engagement was constituted comprising two (2) representatives from the banking industry, one (1) representative from capital markets, one (1) representative from the insurance industry and one (1) representative from the Chamber of Corporate Trustees.
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The consultative committee’s mandate was to lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry feedback on the debt management strategy to the Ministry of Finance (“MoF”) and Bank of Ghana (“BoG”).
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We were therefore surprised when on December 2, 2022, we were invited to a meeting at the BoG during which the bond exchange program was presented to us and subsequently launched on December 5, 2022. We believe a bond is a contractual agreement between a borrower and a lender (bondholders) and therefore any changes to the terms must be agreed to by both parties.
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We, at the GSIA understand the difficult crossroads at which our nation currently finds itself and the difficult choices that need to be made to set us on the path to debt sustainability. However, we are unable to accept the bond exchange program announced by the Minister of Finance in its present form.
The Way Forward
It is our intention to engage the MoF on our concerns and reservations. We therefore urge the investing public to continue to have confidence in us as we pursue this process. In this vein we entreat clients of our member firms to allow us to engage and then communicate the outcomes to enable them take the best decision on their investments.
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Issued by the Governing Council on December 7, 2022
The Ghana Securities Industry Association was incorporated as a company limited by guarantee on 11 December 2003 to encourage sound business practices among members, work in partnership with the industry regulator to ensure the protection of investors . The association comprises firms licensed by the Securities and Exchange Commission under the Securities Industry Act 2016, (Act 929). The group comprises Broker-Dealers, Custodians, Fund Managers, Investment Advisors, Issuing Houses, Securities Exchanges and Securities Depositories.
