Economist explains who will be affected by debt exchange programme

A Financial Analyst with Dalex Finance, Joe Jackson has stated that persons whose bonds and investments will be affected by the debt exchange programme are individuals who do not hold government bonds individually.

According to him, since the government has exempted individual bondholders and Treasury bills from the list of affected people, “smaller investors” will bear the brunt of the action.

“At this moment, individuals who were wealthy enough to buy bonds in their own names are not being touched, Treasury Bills are not being touched. It is corporates that are being touched,” he was quoted by 3news.com.

“Unfortunately,” he added, “the smaller investor who is not rich enough to buy bonds in his name is now indirectly, being affected because that investor joined a corporate investment scheme, and the scheme is a corporate entity that has been affected by the haircut.

“At this moment, you have got to accept it and move on however bitter the pill is, however unfair the pill is, however angry we feel about the pill,” he said.

Government announced the Debt Exchange programme on December 5, 2022, to invite domestic bondholders to voluntarily swap their bonds for fresh ones.

The finance minister said: “In particular, it does not embed any principal haircut on Eligible Bonds, as we promised. Let me repeat this fact as plainly as I can, in this debt exchange individual holders of domestic bonds are not affected and will not lose the face value of their investments. So let us remove any doubt and discard any speculation that the Government is about to cut your retirement savings or the notional value of your investments.

“That is not the case. As already announced, Treasury Bills are completely exempted, and all holders will be paid the full value of their investments on maturity. There will be NO haircut on the principal of bonds. Individuals who hold bonds will also not be affected at all,” he added.

Joe Jackson further urged the government to also cut its expenditure in order for the restructuring to achieve the intended purpose.

He continued, “The government must also cut expenditure; this is about cutting expenditure too. At the moment, I don’t think the government has cut enough expenditure. In next year’s budget, we are still borrowing GH¢61 billion.

“That doesn’t make sense to me, that is not a nation in austerity. The government must cut expenditure, they must show that they are willing to bear the pain,” he said.

SSD/MA