The Domestic Debt Exchange Programme (DDEP) has provided the government of Ghana with "increased fiscal flexibility and addressed cash and other liquidity constraints", Finance Minister Ken Ofori-Atta has told parliament in his mid-year budget review on Monday, 31 July 2023.

The government announced the DDEP in the 2023 budget statement "to alleviate fiscal pressures by: reducing debt servicing costs, improving debt sustainability, and ensuring macroeconomic stability and economic growth".

The restructuring, Mr Ofori-Atta stressed, "is critical to the implementation of the IMF-supported PC-PEG Programme".

He indicated to the legislature that to ensure a return to the path of debt sustainability, "a comprehensive debt strategy, centred on a restructuring programme was pursued".

The perimeter for the restructuring includes both domestic (central government debt and some parastatals) and external.

The main aim of the operations is to reduce debt servicing costs and restore debt sustainability.

The debt operation focuses on achieving, by 2028: i. the present value of overall debt and external debt to GDP to below 55 per cent and 40 percent thresholds, respectively; and ii. external debt service to revenues and exports below the 18 per cent and 15 per cent thresholds, respectively".

Domestic Debt Exchange Programme (DDEP)

On 5 December 2022, the government launched the DDEP in a "transparent manner while seeking to minimise its impact on bondholders", Mr Ofori-Atta reminded parliament.

After three months of negotiations with the different bondholder groups and amendments to the original terms, the government, he noted, "successfully completed the DDEP on 14th February".

The total bonds outstanding at the settlement date amounted to GH¢126,978.5 million, of which GH¢29,286.2 million were held by Pension Funds, bringing the total eligible bonds to GH¢97,749.6 million.

The ministry of finance received final participation of GH¢82,994.5 million, representing 84.9 per cent of the total eligible bbonds.

Mr Ofori-Atta expressed the government’s appreciation to the participants, saying: "Once again, we are grateful to all investors who participated in this exchange".

He said to complete the domestic debt ooperations, the government announced in April 2023, its intention to further pursue the discussions around the following domestic debt instruments which were excluded from the DDEP perimeter:

i. Energy sector Independent Power Producers (IPPs);

ii. Cocobills;

iii. Local US dollar denominated bond; and

iv. Bank of Ghana non-tradable debt.

Out of these remaining debt instruments, Mr Ofori-Atta said the government launched debt operations for the Cocobills and local US dollar-denominated bonds on 14 July 2023.

The settlement date, he announced, is today, Monday, 31 July 2023, noting: "We look forward to a successful operation".

He said "although Pension Funds were exempted from the main DDEP, we continue to engage them".

"We are also engaging with the IPPs on debt relief and financing arrangements to achieve both debt sustainability for Ghana and financial sustainability for the energy sector", he chipped in.

As part of the restructuring process for external debt, Mr Ofori-Atta said the government requested the treatment of the bilateral debt under the G20 Common Framework beyond the Debt Service Suspension Initiative.

The government, he said, also held a series of engagements with its bilateral creditors via the Paris Club to provide financing assurances to support Ghana’s IMF-ECF request.

The Official Creditor Committee for bilateral creditors was established and co-chaired by China and France.

The Committee provided financing assurances on 12 May 2023, to support the IMF's Board approval of Ghana’s IMF-ECF request on 17 May 2023.

The government has also begun the process of negotiating with its commercial creditors (Eurobond investors).

The minister pointed out that two bondholder groups have been formed, comprising domestic and regional bondholders as well as international bondholders.

Also, he said the government has already shared a set of data and scenarios to commence discussions.

On the restructuring of Eurobonds, Mr Ofori-Atta said: "We expect to receive counteroffers from the bondholders in the short-term and envisage an agreement by year end".

On the impact of the debt restructuring programme, Mr Ofori-Atta said the financial sector, comprising commercial banks, specialised deposit-taking institutions, insurance sector, and fund managers, participated significantly, explaining that the effects of the debt operations on the financial sector is elevated liquidity and solvency risks from impairment losses.

Regulators, including the Bank of Ghana, provided temporary regulatory forbearance to mitigate the liquidity impact of the DDEP, Mr Ofori-Atta added. "Importantly", he said the government is working with key partners to establish a Ghana Financial Stability Fund to provide liquidity and solvency support to the financial institutions.

The eligibility criteria agreed with regulators and international partners will be published soon, he promised.

These macro-prudential interventions and operations, he noted, were also to address the impact of the large external shocks within a wider global economic context.

He said the government is "also mindful of the impact of the debt exchange programme on individuals" and is "working hard to stabilise the economy toward a faster economic recovery to ameliorate the impact on the welfare of individuals".