DDEP: Take your principal, 5% coupon and stay away from government bonds – Economist

A chartered economist is advising individual bondholders to accept the government's decision to pay them a five percent coupon on the maturity of their bonds by the end of 2023.

Mr Bernard Oduro Takyi gave this advice in an interview on the mid-day news on Accra 100.5 FM on Tuesday, January 24, 2023.

According to him, this is the best deal ever offered by the government since the announcement of the implementation of the Domestic Debt Exchange (DDE) programme.

The Government of Ghana on Monday, January 23, 2023, together with the Ghana Association of Banks (GAB), made “significant progress” on the terms of the participation of banks in the domestic debt exchange programme (DDEP).

This agreement, according to a statement jointly signed by the two parties, “encompasses final improvements to the terms of the DDEP.”

It includes “an agreement to pay a 5% coupon for 2023 and a single coupon rate for each of the 12 new bonds resulting in an effective coupon rate of 9%, clarity on the operational framework and terms of access to the Ghana Financial Stability Fund (GFSF) and the removal or amendment of all clauses in the Exchange Memorandum that empowers the Republic to, at its sole discretion, vary the terms of the Exchange.”

According to him, this deal with the Association of Banks is the best deal possible under the current economic situation.

This is better than the earlier zero coupons announced by the government, he stressed

He argued that a five percent coupon is the best deal for the bondholders and further commended the government for reviewing its stance on the payment of zero coupons.

He quickly warned the individual bondholders to take their principal and coupon, and henceforth shy away from all government bonds.

“Make no mistake by further rolling over the principal in government bonds because investment in bonds is not lucrative like it used to be. Bonds under this government are nothing to write home about for bondholders to roll over,” Mr Oduro Takyi cautioned.

He said it is only a “madman” who will reinvest in government bonds after this melee.