Securities Industry falls in line with Domestic Debt Exchange Programme

  Fri, 27 Jan 2023
Economy & Investments Securities Industry falls in line with DomesticDebt Exchange Programme

The Ghana Securities Industry Association (GSIA) has become the third financial sector player to agree to the government's Domestic Debt Exchange Programme (DDEP).

This comes after the Ghana Association of Banks and the Ghana Insurers Association had this week agreed to participate in the programme for institutional bondholders.

In a joint press statement, the Ministry of Finance and the Association announced the agreement on terms for participation by capital market operators.

The agreement entailed extending agreed improved terms with the banks to all GSIA members and the removal of all clauses in the Exchange Memorandum that empowers the Republic to, at its sole discretion, vary the terms of the exchange.

Similar to the terms of banks, the government has agreed to pay a five per cent coupon rate for 2023 and a single coupon rate for each of the 12 new bonds to be issued, resulting in an effective coupon rate of 9 per cent.

The Government has also committed to providing support to GSIA members impacted by the programme via the liquidity and solvency window of the Ghana Financial Stability Fund (GFSF).

“Collective Investment Schemes (CIS) and individuals who hold bonds in Trust Accounts with Securities and Exchange Commission (SEC) approved firms, would be offered any enhanced commercial terms agreed with, or exemptions granted to, Individual Bondholders,” the statement read.

GSIA said the agreement was necessary to restore market normalcy and confidence in the economy.

“GSIA urges its members to seek all required internal approvals and clients' consent to participate in the DDEP per the new terms in the updated Exchange Memorandum,” the statement read.

The Government invited eligible holders of domestic notes and bonds of the Republic, E.S.L.A. Plc and Daakye Trust Plc to exchange approximately GHS137.3 billion for a package of new bonds issued by the government on Monday, December 5.

Failure to patronise the “voluntary” offer has necessitated further consultation with stakeholders as the government sought to restructure its debt which has reached an unsustainable level, with a domestic debt obligation of approximately GHS137 billion.

Ghana's debt servicing is now absorbing more than half of total government revenues and about 70 per cent of tax revenues, while total public debt stock, including that of State-Owned Enterprises, exceeds 100 per cent of Gross Domestic Product (GDP).

Debt restructuring to ensure Ghana's debt reaches at least 55 per cent of its threshold is part of the conditions for the International Monetary Fund to provide the country a US$3 billion loan facility.