Debt exchange programme will destroy savings of Ghanaians - Chamber of Corporate Trustees

The Chamber of Corporate Trustees has rejected government’s debt exchange programme, arguing “it is injurious to the interest of contributors to pension schemes.”

In a press release sighted by the Business and Financial Times, Thomas Kwesi Esso, CA, Executive Secretary of the Trustees, assured contributors to pension schemes that the industry “has not agreed to the debt exchange programme proposed by the Ministry of Finance.”

According to him, the proposal as put forth by the Minister of Finance was inferior to market expectations and would destroy the savings of Ghanaians and further undermine market confidence.

“This is why we reject it outright,” Kwesi Esso said: “As Trustees, we hold a fiduciary responsibility and are enjoined to seek the best interest of contributors at all times,” he stated.

Kwesi Esso added: “We recognize that inflation has caused significant harm to pension fund assets this year and that there is an urgent need to reduce Government debt burden and restore macroeconomic stability. That should however not be done to the detriment of contributors to pension schemes.”

“We share in Government’s call for burden sharing, but that should be done in the spirit of fairness to ensure a win-win outcome to all stakeholders,” he said.

Debt exchange to recalibrate interest rate regime

Meanwhile, the finance minister argues that the programme will be a necessary tool to recalibrate the prevailing interest rate regime and return the country’s debt situation to more sustainable levels.

He, therefore, called on holders of domestic debt to voluntarily exchange approximately GH¢137billion of the domestic notes and bonds – including E.S.L.A. and Daakye bonds – for a package of new bonds to be issued by the Treasury.

Currently, the Debt Sustainability Analysis (DSA) demonstrates that the country’s debt servicing absorbs more than half of total government revenues and almost 70 percent of tax revenues. Additionally, the total public debt stock, including that of State-Owned Enterprises among others, exceeds 100 percent of gross domestic product (GDP).

“The extent to which our interest charges consume some 70 percent and sometimes 100 percent of our revenues is something that is not sustainable, and this is really therefore a recalibration of the whole interest rate regime so that we move into a sustainable level."

“This demonstrates unequivocally that Ghana’s public debt is unsustainable, and that government may not be able to fully service its debt down the road if no action is taken,” he admitted.

Government’s key objective for this programme, Mr. Ofori-Atta added, is to alleviate the debt burden in a “most transparent, efficient and expedited manner” by means of an Exchange offer while minimising impacts of the domestic debt exchange on investors holding government bonds.