Govt settles GH₵2.4bncoupons onnew bonds

By Elvis DARKO, Accra

The Ministry of Finance has issued instructions for the settlement of first matured coupons of new bonds issued under phase of the Domestic Debt Exchange Programme (DDEP).

In a Twitter post, the Finance Ministry said that the payment is in line with credibility of Ghana’s domestic debt operation.

“In line with government’s commitment to the continued success and credibility of Ghana’s domestic debt operations, instructions have gone out for the settlement of the GH₵2.4 billion first coupon payment of the DDEP, due today, the tweet stated.

According to the Ministry, new bonds now stand as the dominant instruments in the domestic bond market, laying the basis for rapid recovery.

“We remain committed to the success of the new bonds, and again thank all those who participated in the DDEP for their sacrifices,” it assured

This payment is big boost for restoring investor confidence in the economy and government instruments.

Coupon payments for the new bonds, along with the government’s commitment to fulfilling obligations on the old bonds, are poised to significantly influence market dynamics in the second half of 2023.

Approximately 85% of bondholders participated in the Domestic Debt Exchange Programme (DDEP) yielding GH₵‎82.9 billion (GH₵‎82,994,510,128).

Existing bonds were converted into 16 new bonds with varied maturing dates ranging from August 2023 up until August 2038, while offering varied interest rates of up between 5% – 15% on the new bonds to be paid semi-annually.

With five per cent cash coupon rate for 2023, the coupon obligation on the new bonds amounted to GH₵2.4 billion.

Govt suspends external debt payments

In December, government suspended payments on most of its external debt including Eurobonds, commercial loans and most bilateral loans.

The suspension excluded the payments of multilateral debt, new debts (whether multilateral or otherwise) contracted after December 19, 2022, or debts related to certain short-term trade facilities.

GH₵123bn additional DDEP

Pension fund holdings, cocobills, dollar denominated local bonds, local currency loans and government’s debt to Bank of Ghana (BoG), totaling some GH₵123 billion are also being restructured.

GH₵31bn Pension funds debt exchange

Pension funds have been offered to exchange about GH₵31 billion ($2.7 billion) of existing investments that carry an average coupon of 18.5% for two new bonds maturing in 2027 and 2028 with an average interest rate of 8.4%.

Overall, the offer preserves the net present value of pension funds current holding of old bonds at a 21% discount factor.

GH₵15bn locally issued U.S. dollar bonds and cocoa bills

Government reached an agreement with banks to restructure GH₵15 billion ($1.36 billion) of locally issued U.S. dollar bonds and cocoa bills.

Govt debt owed to BoG write off
Half of government’s GH₵77 billion debt to the country’s central bank has been wiped off, and the remaining balance has been replaced with a 15-year bond with a reduced rate.

GH₵44.8bn interest payments in 2023

In the 2023 mid-year budget review, interest payments have been revised downwards by 14.6%, to GH₵44.8 billion (GH₵44,866 million) representing 5.2% of GDP from GH₵52.5 billion (GH₵52,550 million) representing 6.6% of revised GDP, mainly reflecting the outcome of the ongoing completed part of DDEP.

It is clear that the pressure on government in respect of payment of its debt is high.