Vice President of IMANI Africa, Bright Simons, has expressed concerns about government’s refusal to engage a formal advisory committee representing the bulk of outstanding debt as part of negotiations in the implementation of the Domestic Debt Exchange Programme.

Even though he indicated that the new proposal issued by the Finance Ministry and contained in a Press Statement dated 24th December 2022 was laudable, the amended terms still fall short of the needed collaboration with creditors to guide the process.

“The new proposal, whilst showing capacity for flexibility, still falls short of the co-creation demands being made by creditors. It is not clear why the government prefers to engage with creditors without a coordinating mechanism such as a formal advisory committee representing the bulk of outstanding debt. Perhaps it fears that such a process might undermine its negotiation position by removing the “divide and conquer” option. The danger with the attempt to preserve the fragmentation of the creditor community is the likelihood of inertia being traded for lack of organised resistance,” Bright Simons noted in a write-up that identified 7 flaws in Ghana’s Debt Restructuring and how to fix them.

He also argued that the Finance Ministry’s apparent efforts to harden its resolve and try and hold the line without further concessions will have very little influence to deter holdouts.

“The leaked attorney general report has revealed major chinks in the government’s legal armor: there is very limited prospect that holdouts will get a worse deal from the Ghanaian courts. And given the one-year moratorium on interest payments affecting all creditors, the time delay penalty – stemming from litigation – is less onerous for holdouts if government chooses to outrightly default on their bonds,” Bright Simons said.

The amended GH¢137.3 billion domestic bond exchange programme is expected to be published this week.

The amended terms would be set forth fully in an Amended and Restated Exchange Memorandum, a statement issued by the Finance Ministry dated 24th December, 2022 said.

As part of efforts by the government to restructure the debt programme, individual investors have been included.

Individual bondholders were originally exempted from the domestic debt exchange, however, after government excluded pension funds following pressure from organised labour, the programme is expanded to cover individual investments.

In addition to the modifications, there would be 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. 

The government is also setting a non-binding target minimum level of overall participation of 80 per cent of aggregate principal amount outstanding of eligible bonds among others.