Government must end inclusion of individual bondholders in its debt exchange program

We have monitored with keen interest the decision by the government of Akufo- Addo/Bawumia/Ofori-Atta to include government securities held by individuals in its IMF’s inspired proposal to swap 137.3 billion Cedi ($12.5 billion) of the country’s debt stock in its domestic debt exchange program to earn a $3 billion bailout pending executive level agreement at IMF. Some of these decisions, coming lately from the so- called “Solid” economic management team, reinforce the idea that it has now become the Kweku Ananse wing of the NPP government, with its members jumping out of the capsizing economic management boat.

What Ghanaians already know is that when it comes to debt management, this government is a killer of investor confidence. The moral decadence of the government has now reached an alarming proportion. In the last quarter of last year both President Mahama and minority Ranking Member, Dr. Casiel Ato Forson predicted an inevitable haircut to deal with the mounting national debt. They also predicted default on debt servicing, which all came true. At the time of the prediction, typical of the NPP, the president, his cousin, Ken Ofori Atta, and serial communicators of the government rubbished such predictions. In a speech prepared in English, but laced with French interjections, the president stated categorically that there will be no “haircut” and “no noise,” because money doesn’t like noise. Events later proved that the president involved himself in a public deception reminiscent of the cathedral and Agenda 111 hospitals promises. The haircut was introduced under a different brand name as a debt exchange to camouflage Ghanaian investors. But, in any case whether it is a debt swap, debt exchange, equity swap or haircut, our country is in unofficial “Chapter 14 bankruptcy” after multiple downgrades. The freeze of coupons on government’s held securities that accompany the debt exchange program will certainly narrow further the government’s domestic borrowing space.

It is obvious that the government of NPP by all indication crafted a secret plan to fool Ghanaians after running the economy down. Close to the end of last year, we were told by the Nicodemus government of the NPP that the debt exchange program will affect only institutional bondholders on their own volition. They assured that individual bondholders will not be affected by the program. But what we are witnessing now is the contrary. We have observed that the government is forcefully expropriating resources from the individual bondholders by asking them to accept reduced coupons on their bonds voluntarily by January 16th of this year. As we have it now, the poor citizens of our country do not even have any belts left to tighten. Their real incomes and value of investments have already been severely eroded by the prevailing galloping inflation and depreciation of the cedi. So, if this program is allowed to be implemented, it means the coupons that were due on these bonds will not be paid, crippling bondholders, some of whom are retirees dependent on such earnings. Consequently, consumer driven economic stimulation will also suffer, worsening the economic crisis.

The other issue of concern, related to this backstabbing economic policy is that it has no parliamentary approval and support. Basically, the finance ministry is implementing this program under a “decree” under rule of finance, when our country is governed by the rule of law. For our love of democracy, we cannot allow this aberration involving government managed public theft of private investment through haircuts. The implementation of this program will also trigger numerous lawsuits and its concomitant judgment debts. This is not where Ghanaians want their country to be.

Also, it is trite knowledge that people who heavily invested in the affected government securities in Ghana are mostly in the middle class, whose spending has kept consumer contribution to economic stimulation active. Therefore, if individual bondholders are included in the debt exchange program consumer confidence will erode significantly.

Amid all these mess, the Akufo-Addo/Bawumia led government has maintained a bloated government and ignored every call to cut expenditure by reducing its size. The government has also refused to end its white elephant “flagship” programs, which have become economic vampires of the resources of our nation. Instead, they are going after hard earned resources of innocent citizens, who invested in government securities in the name of domestic debt exchange to qualify for the IMF program, which they criticized while in opposition. Before the NPP came to power, the safest and risk-averse financial instruments were Treasury bills. Therefore, from accounts in the media, some of the bondholders sold their properties and other assets to invest in Treasury bills only to learn that their coupons cannot be honored because of the debt exchange program. This certainly will erode investor confidence in the Ghanaian bond market, worsening our

predicament.
The nagging question this government has ignored and rather deflected to Russia/Ukraine is, how did we get here? The truth is that nobody can put the current crisis past the government led by Akufo-Addo and Bawumia hubris and “know it all” attitude. In the heydays of this government, they engaged in reckless borrowing and enlargement of government size as if there wasn’t tomorrow. They behaved like a child who just got their first credit card whiles living with their parents. They went on a spending spree whiles mocking the NDC’s economic expert, who continuously cautioned of a looming mess. The wages of the show of their hubris are the mismanagement of the robust economy they inherited from the NDC’s government. This is manifested in the current economic

decay. Why then should poor domestic investors carry the cross for our failed government manufactured through incompetence?

Given the impending mess the debt exchange will bring, we call on all stakeholders of our country including, political parties, chiefs, the clergy, labor unions, students’ unions and other well-meaning Ghanaians to call the government of Akufo- Addo/Bawumia/Ofori-Atta to halt the haircut or debt exchange program to alleviate the suffering of Ghanaians. We call on the government to continue to issue coupons to bondholders to keep consumer and investor confidence high. We also call on the government to organize a national conference on the economy to build consensus on the way forward. Through this release, we express support for the call by the Ghana Domestic Bondholders Association for the government to rescind its decision to include individual bonds in its domestic debt exchange program.

Long Live Ghana Long live the NDC
NDC New York Communication Bureau.