During an interview on Starr FM, Madam Akuffo revealed her unease, stating that the government wanted them to endorse agreements that were not fully comprehended.

In her remarks, she highlighted the government’s attempt to alter expectations without due process, drawing parallels to past times when decrees dictated sudden changes in the country.

She recalled instances where waking up to find new currency or altered denominations was enforced by decree, questioning the rationale behind such abrupt transformations.

“You contracted me, that in return for buying your bonds, these are what I am expecting. Now you want to change my expectations for whatever reasons you don’t do by decree. It was more like the days when you wake up in the morning and by decree, something has happened in Ghana.

“All of a sudden no more 50 cedi notes or all of a sudden from Saturday there is a new currency but the new currency is not in circulation yet. But Saturday, Monday what you have is no longer money, decree. What kind of life is that?” Madam Akuffo asked.

Expressing her disappointment, she referred to the pensioners who resorted to picketing, stating her upset over retired individuals reaching such a desperate point due to someone’s insistence on breaching the law.

Madam Akuffo firmly maintained her stance on principles and legal adherence in the face of perceived unjust actions by the government.

Source: citinewsroom

The Minister of Finance, Ken Ofori-Atta, who gave the assurance at a meeting in London yesterday with holders of Ghana’s international bonds, said in spite of 2024 being an election year, the government would stay within the International Monetary Fund (IMF) supported budget which would be presented to Parliament later next month.

Four months after implementing the Post-COVID-19 Programme for Economic Growth (PC-PEG) backed IMF programme, Ghana’s economy is beginning to see some stability, with gross domestic product (GDP) growth averaging 3.1 per cent in the first half of the year.

Inflation, which reached a 22 year high of 54.1 per cent in December 2022, has also declined to a 12-month low of 38.1 per cent in September and on the fiscal front, the primary balance on commitment basis for the first half of the year was a surplus of about GH¢2 billion compared to a target of a deficit of GH¢4 billion.

Gross International Reserves (GIR) also stood at $2.1 billion equivalent to 1.0-month import cover, compared with US$1.5 billion (0.6 month of import cover) recorded at the end of December 2022, with the cedi also stabilising.

With the country going into another election year, there have been some fears in the investor community on how to sustain this growth path due to the overspending which is usually associated with election years which ends up in huge budget deficits.

Many of them are worried that the successes that have been chalked up so far under the three-year Extended Credit Facility with the IMF would be derailed in an election year.

Mr Ofori-Atta has, however, given an assurance that the government would stay true to the programme and the 2024 budget.

“Ahead of the 2024 election year, let me assure you that we are committed to implementing the IMF supported PC-PEG as planned, and this is what our constituents expect from us,” he stated.

“This will help us further support the strong economic recovery,” the Finance Minister added.

He said having been deeply impacted by the crisis of last year, Ghanaians now expected the government to deliver macroeconomic stability, a swift return to low inflation and a sustained stabilisation of the value of the cedi; and not an increase in public spending.

“This is completely in line with the successful implementation of our IMF programme,” Mr Ofori-Atta stated.

Wide-ranging policies
The minister said the government was committed to continue implementing a wide range of policy reforms, supported by the IMF.

He said its priority was to ensure fiscal and debt sustainability by amending the Fiscal Responsibility Act, 2018 (Act 982) and accelerating the procurement of the Integrated Tax Administration System.

Mr Ofori-Atta stated that the government was also focusing on financial sector reforms towards rebuilding the capital buffer of commercial banks, enhancing Bank of Ghana’s (BoG’s) inflation targeting framework and rebuilding international reserves buffers.

“We are also working on social protection and structural reforms, including expanding the coverage and enhancing the benefits in real terms under the Livelihood Empowerment

Against Poverty Programme, the National Health Insurance Scheme and the School Feeding Programme,” he stated.

Mr Ofori-Atta was confident that the bold reforms would help secure a stable and prosperous future for the country.

DDEP, thing of the past
The Finance Minister also pointed out that all planned exchanges of domestic marketable debt had been completed, adding that the DDEP would not be reopened.

Mr Ofori-Atta said the effort made by domestic holders of public debt, including the BoG, had been significant, and that was now a thing of the past.

“New debt instruments issued by the government in the domestic market are safe and secure,” he stated.

The first part of the DDEP saw the government swap old bonds valued at GH¢82 billion for 12 new ones at reduced coupon rates and longer tenors.

The exchange of dollar denominated local bonds of about $742 million also saw a participation ratio of 91.7 per cent; the exchange of cocoa bills worth GH¢ 7.7 billion also saw a participation ratio of 97.4 per cent, while the exchange of pension funds holdings of treasury bonds of about GH¢29.6 billion also saw a participation ratio of 95.3 per cent.

Mr Ofori Atta told the bond holders that the reduced coupon rates and lengthened maturities achieved through the DDEP was expected to provide the government with much-needed breathing space and to set its domestic debt to GDP on a clear downward trend.

He added that considering the new structure of domestic debt resulting from the exchanges, current domestic market interest rates were expected to remain fully consistent with sustainable public debt path.

Under the IMF programme, the country’s debt-to-GDP is expected to reduce to 55 per cent within three years.

External debt negotiation
On the external front, Mr Ofori-Atta stated that a successful completion of the external debt restructuring exercise was crucial for the country.

He said the bilateral Official Creditor Committee (OCC) co-chaired by China and France had formally committed to providing a debt treatment that would restore Ghana’s debt sustainability and ensure full financing of the IMF programme.

He said technical discussions had made significant progress and government was engaging with the OCC to negotiate the specifics of an agreement to restructure its $5.4 billion debt owed to bilateral creditors.

On the commercial side, the finance minister said two bondholder groups had been formed, made up of domestic and regional bondholders and international bondholders as it sought to restructure debts of about $14 billion.

“We have engaged in good faith discussions with both of them and shared illustrative debt restructuring scenarios in May”.

“We have now received debt treatment scenarios from both bondholder groups and expect to accelerate our constructive dialogue in the upcoming weeks,” he said.

Source: graphic online

According to the Ministry, the matured coupons amount to GHC 2.4 billion, and instructions have already been sent for settlement.

The DDEP was launched in 2022 in an effort to restructure Ghana’s unsustainable debt burden. Under the programme, eligible bondholders were given the option to exchange their old bonds for new bonds with lower interest rates and longer maturities.

The coupon payment for the affected bonds was agreed to be 5%, which was lower than the interest rates on the old bonds.

However, there were initial market uncertainties about whether the government would be able to make the 5% coupon payment but the Ministry of Finance has allayed these concerns, stating that the settlement of the first coupon payment is consistent with the government’s commitment to the continued success and credibility of the country’s domestic debt operations.

The ministry also noted that the new bonds that were issued under the DDEP now stand as the dominant instruments in the domestic bond market.

Source: citinewsroom

The BoG has come under intense pressure from opposition political parties and civil society groups following the loss it incurred.

The Minority Leader, Dr. Cassiel Ato Forson, on Tuesday, demanded the resignation of the Governor, Dr. Ernest Addison, and his deputies over the issue, insisting the apex bank had been reckless; a claim rejected by the BoG.

Meanwhile, the IMF in a post on its website explained that the BoG suffered losses because it participated in the Domestic Debt Exchange Programme (DDEP), which was a key element of the government’s plan to restore macroeconomic stability and public debt sustainability.

“The BoG is participating in the DDE to share some of the burden the DDE places on government debt holders, along with banks, other financial institutions, pension funds and individuals,” IMF added.

The IMF said the loss the BoG incurred in the process contributed to reducing its net equity to a negative value.

However, it assured that this does not prevent the BoG from fulfilling its policy mandates and ensuring inflation gradually returns toward its 8% target.

The IMF indicated that the central bank income was expected to be sufficient to cover monetary policy operational costs, and as such, the BoG’s net equity was expected to improve significantly over time and eventually return to positive territory.

Below is what IMF said about BoG’s loss

Why did the Bank of Ghana (BoG) incur losses from the authorities’ domestic debt exchange and what are their implications?

The Ghanaian authorities’ domestic debt exchange (DDE) is a key element of their plan to restore macroeconomic stability and public debt sustainability. The BoG is participating in the DDE to share some of the burden the DDE places on government debt holders, along with banks, other financial institutions, pension funds and individuals.

The loss the BoG incurred in the process has contributed to reducing its net equity to a negative value. Importantly, however, this does not prevent the BoG from fulfilling its policy mandates and ensuring inflation gradually returns toward its 8-percent target. Indeed, central bank income is expected to be sufficient to cover monetary policy operational costs. The BoG’s net equity is expected to improve significantly over time and eventually return to positive territory.

Source: citinewsroom

These remarks from the National Democratic Congress (NDC) Flagbearer followed an explanation by the Bank of Ghana (BoG) that a significant portion of its GH¢60 billion losses reported in the 2022 financial results, amounting to GH¢53.1 billion, were a direct consequence of the government’s domestic debt restructuring efforts encompassing both phases.

In a statement issued on Wednesday, the BoG clarified that the domestic debt exchange (DDE), a pivotal component of the corrective strategy mandated by the International Monetary Fund (IMF) program, did not achieve the anticipated objectives. The objective had been to halve the stock of government debt from 105 per cent of the Gross Domestic Product (GDP) to 55 per cent of GDP by 2028.

The statement from the Bank of Ghana stated, “Despite the negative effects on households and banks, the targeted threshold of 55 per cent of GDP was not reached. The Bank of Ghana played a role in bridging this gap to enable Ghana to meet the debt threshold that qualified the country for the IMF program. Consequently, the Bank of Ghana absorbed the associated losses.”

Reacting on August 10 in a Facebook post, the former President accused Finance Minister Ken Ofori-Atta of adversely impacting the economy while leveraging Covid-19 and the Ukraine/Russia conflict as distractions.

Furthermore, Mahama asserted that the Governor of the Bank of Ghana, Ernest Addison had caused damage to the central bank and was now utilizing the Domestic Debt Exchange (DDE) to divert attention from the central bank’s deterioration.

Read Mr. Mahama’s entire Facebook post below;

“An inept Finance Minister undermines the economy and resorts to Covid-19 and the Ukraine/Russia conflict as diversions. A compliant Governor undermines the Central Bank’s integrity and turns to the Domestic Debt Exchange (DDE) as a façade.”

Source: graphic online

A statement from the BoG said domestic debt exchange (DDE), which was a major plank of the corrective action required for the International Monetary Fund (IMF) programme, did not achieve the required target.

The target was for the stock of government debt to be halved from 105 per cent of Gross Domestic Product (GDP) to 55 per cent of GDP by 2028.

“Despite the losses inflicted on households and banks, the threshold of 55 per cent of GDP was not met”.

“The Bank of Ghana was used to close the gap to enable Ghana to meet the debt threshold that qualified Ghana for the IMF programme.

The Bank of Ghana, therefore, acted as a loss absorber,” the statement added.

That meant the BoG had to absorb a 50 per cent haircut on its non-marketable holdings of government debt instruments, it added.

“This singular act led to significant impairment losses of GH¢32.3 billion to the bank’s accounts.

Impairments of marketable instruments also accounted for another GH¢16.1 billion, bringing the total impairments of government holdings to GH¢48.4 billion.

This was after many events had resulted in sovereign spreads on Ghana bonds widening, signalling investor dissatisfaction with the stance of fiscal policy, the statement said.

Coupled with below target performance of projected revenue to support expenditure, the credit rating agencies further downgraded Ghana’s sovereign debt rating, which blocked the country’s access to international capital market borrowing, the statement noted.

Context
Contextualising the GH¢60 billion loss in its financial results for last year, the BoG said the losses emanated from challenges the country had faced since 2019.

The statement further said there was a clear mismatch between revenue inflows and expenditure financed in 2020 by exceptional support from the IMF and the World Bank resources.

In addition, the expenditure was also financed from the BoG through the issuance of the GH¢10 billion COVID-19 bond.

As a result, sovereign spreads on Ghana bonds widened, signalling investor dissatisfaction with the stance of fiscal policy, the statement said.

Budget fiscal gaps
The BoG further explained that last year’s budget, which was read in 2021, failed to address fiscal concerns.

“The budget was even more expansionary by about 23 per cent with a raft of revenue measures to raise financing,” it added.

The result was the downgrades, which blocked the country’s access to international capital market borrowing, the statement noted.

“This triggered a liquidity crisis, spilling over into a balance of payments crisis.

External and domestic payments needed to be made, the domestic auction was failing, and the Bank of Ghana had to step in to arrest a major economic and social crisis,” the bank explained.

Losses
In two months, the BoG said it lost $500 million in reserves and built significant overdraft with the government as a result of the auction failures.

It became clear that Ghana was on a path that was unsustainable, and the government had to approach the IMF for support in July 2022.

The IMF process included putting into place a credible programme of reform, which included restructuring of the total government debt to sustainable levels.

“Until Staff Level Agreement with the IMF was reached in December 2022, the Bank of Ghana had to continue to provide the necessary support to keep the economy running,” the central bank stated.

In line with the provisions of the Bank of Ghana Act (Act 612), as amended, the central bank informed the Minister of Finance of the developments in its finances.

The Minister, subsequently, reported that to Parliament as part of his briefing on the IMF programme and the DDE.

Major plank
The statement said a major plank of the corrective action required for the IMF programme was the DDE.

The holders of government debt had their debt instruments exchanged for new ones with lower interest payments and longer terms.

Despite the losses inflicted on households and banks, the threshold of 55 per cent of GDP was not met, it said, adding that eventually the BoG was used to close the gap to enable Ghana to meet the debt threshold to qualify Ghana for the IMF programme.

Cocoa
The central bank said price and exchange rate movements experienced globally led to a loss of GH¢5.2 billion, while impairments of COCOBOD loans amounted to GH¢4.7 billion, adding to the reason the BoG reported a loss of GH¢60 billion for last year.

The statement explained that central banks were not commercial banks and as such the financial outcome had very little implication for its operations as supported by evidence from other central banks, stressing that “technically, central banks cannot be insolvent or bankrupt”.

The BoG assured key stakeholders and the public that it was committed to the highest standards of prudent management, governance, and transparent accounting and audit practices.

Source: graphic online

“With BoG being the absorber, the external partners are also watching. Remember they also need to go through some debt treatment but before that, they needed to see what will happen to the Bank of Ghana and now that they’ve seen that, it will send a signal to them.

“With this, I’m sure it will make the process go faster because the biggest policy institution has taken a haircut,” Dr. Philip Abradu-Otoo, Director of Research at BoG said.

Bank of Ghana incurred a loss of GH¢55.12 billion in 2022, largely as a result of the government’s Domestic Exchange Programme (DDEP) after its non-marketable holdings of government of Ghana instruments including long-term stocks, a COVID-19 Bond and overdraft were subjected to a 50 per cent haircut.

Also, the Bank’s other claims (holdings of marketable instruments) were exchanged under similar terms as other financial institutions under the DDEP, leading to an impairment of GH¢48.40 billion in 2022.

In addition, the Bank incurred revaluation losses on its foreign assets and liabilities due to exchange rate depreciation, leading to a total loss of GH¢55.12bn equity in 2022.

However, the Central Bank said it would implement measures, including government’s support for recapitalisation to ensure that equity was restored to positive path by the end of 2027.

Dr Abradu-Otoo said the BoG remained committed to policy solvency, diligently managing inflation and ensuring financial stability despite facing challenges emanating from the Domestic Debt Exchange Programme (DDEP).

Source: gna

The government has failed to meet its obligations to pensioner bondholders who were exempted from the Domestic Debt Exchange Programme.

This includes individual bondholders who did not participate in the scheme, treating them unfairly.

Today, the agitated bondholders are back with placards to picket the offices.

Some of them clad in red bands chanting war songs in hopes of getting the authorities’ attention.

‘Show us some care’, ‘Pensioners’ funds = Pension funds’ are some of the inscriptions on the signage they hoisted.

Pensioners Bondholders Forum say their bonds matured as far back as March and have not been paid, hence the action.

A retired police officer who has his funds locked up lamented the situation’s impact on his activities.

“He [Finance Minister Ken Ofori-Atta] should try and pay my money to me. Even if they will cease the issued and give us our capital or principal money we used in the bonds, they should give it to us,” he told the media.

He says he did not imagine his reward after decades of service the country will be this bitter.

Source: myjoyonline

Dr. Forson specifically cited the implementation of the government’s Domestic Debt Exchange Programme (DDEP) as a major factor in banks’ inability to lend to businesses.

He expressed concern that many local banks, which play a vital role in supporting small and medium-sized enterprises (SMEs) in Ghana, are currently facing significant financial difficulties.

Dr. Forson called for discussions among stakeholders to find ways to support local banks during this difficult period.

“I am deeply concerned about the current state of our banking sector, especially the impact of government policies on our local banks. It’s no secret that many of these banks, which are essential to supporting small and medium-sized enterprises (SMEs) in Ghana, are facing severe financial difficulties,” he posted on Facebook.

“Under the leadership of Alhaji Bawumia, the Head of EMT, the NPP government has implemented policies that have seriously eroded the capital of most of our banks. This is having a devastating effect on their ability to lend to businesses, create jobs, and contribute to the growth of our economy.

“I believe it’s time for a serious discussion about how we can support our local banks and help them weather this difficult period”.

The restructuring of Ghana’s local currency and overseas debt caused GCB Bank Plc and Standard Chartered Bank Ghana Ltd. to report significant losses.

According to Bloomberg, banks operating in Ghana have suffered a total loss of about $1.4 billion due to the restructuring of most of the country’s public debt, estimated at 576 billion cedis.

Source: graphic online

On Wednesday, President Nana Akufo-Addo delivered the State of the Nation Address in Parliament, highlighting some of the government’s key deliverables.

In a debate on the address, John Kumah claims that the government’s DDEP is producing positive results for economic transformation.

“Last week, the treasury bill rate in the country was at 35 percent. Today as we speak, the treasury bill rate has been reduced to 24 percent because of the DDEP. We had oversubscription and even at 24 percent, there is an oversubscription of 121 percent. We are going to see a further reduction in the coupon rate of T-Bills. What that portends for our country in future is that inflation will come down, cost of borrowing for the private will also go down and this will restore economic stability and inclusive growth of our economy.”

Executive Director of Dalex Finance, Joe Jackson, has lauded government’s decision to reject bids made for the 91,182 and 364 day bills with yields over 35% in a recent T-Bills auction on March 3, 2023.

This, he notes is a crucial step towards addressing the high interest rates on government securities.

Government rejected all the bids for the sale of Treasury bills from investors on Friday March 3, 2023, citing concerns that the yields were too expensive to maintain.

It was rather seeking to raise ¢2.78 billion from the T-bills this week to refinance maturing bills worth ¢2.55 billion, but it described the yield as too expensive

According to sources, the government is now demanding bids for Treasury bills with yields less than 30%, indicating its commitment to reducing the cost of borrowing for itself and other investors.

Source: citinewsroom