Government continues to engage pension fund managers over Debt Exchange Programme

In a bid to bring the country's high debt to sustainable levels, the government has hinted of its intention to continue engaging managers of pension funds with the aim of agreeing to some sort of restructuring of pension funds as part of the next phase of the domestic debt exchange program (DDEP).

The next phase of the DDEP program aims to include debt exchange for the energy sector, independent power producers (IPPs), cocoa bills, local US dollar-denominated bonds, and Bank of Ghana non-tradable debt.

Presenting the mid-year budget review in Parliament, Finance Minister Ken Ofori-Atta emphasized that the DDEP had already provided the government with increased fiscal flexibility, addressing cash flow and liquidity constraints.


However, to complete the domestic debt operations, the government intends to engage in discussions around other domestic debt instruments that were initially excluded from the DDEP perimeter.

“Mr Speaker, although pension funds were exempted from the main DDEP, we continue to engage them,” he said.

The DDEP was launched by the government on December 5, 2022, in a transparent manner with a focus on minimizing its impact on bondholders.

After three months of negotiations with various bondholder groups and amendments to the original terms, the DDEP was successfully completed on February 14, 2023.

The Ministry of Finance received final participation of GH¢82.99 billion, representing 84.9 per cent of the total eligible bonds.

As part of the debt restructuring process for external debt, the government requested the treatment of bilateral debt under the G20 Common Framework beyond the debt service suspension initiative. Engagements with bilateral creditors via the Paris Club led to financing assurances to support Ghana's IMF-ECF request.

Regarding Eurobond investors, the government has begun the process of negotiating with its commercial creditors. Two bondholder groups have been formed, comprising domestic and regional bondholders as well as international bondholders. The government expects to receive counteroffers from bondholders in the short term, with the goal of reaching an agreement by year-end.

While the DDEP has had significant participation from the financial sector, including commercial banks, specialized deposit-taking institutions, insurance sectors, and fund managers, it has also raised concerns about elevated liquidity and solvency risks.

To mitigate these risks, regulators, including the Bank of Ghana, provided temporary regulatory forbearance. Additionally, the government is working to establish a Ghana Financial Stability Fund to provide liquidity and solvency support to financial institutions.

Despite the government's efforts, labour unions remain firm in their position to exempt pension funds from the DDEP.

The Trades Union Congress (TUC) Secretary-General, Dr Yaw Baah, expressed the unions' rejection of the government's new proposal to the Board of Trustees of Pension Funds. While the labour front has urged the Trustees not to engage further with the government on the proposal, discussions are ongoing among various labour unions on the matter.

NW/DO

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