Debt operation: Your monies will reduce if you do panic withdrawals - NPP MP

Dr. Stephen Amoah, Member of Parliament (MP) for Nhyiaeso, has warned that those who intend to withdraw their funds immediately as a result of the Domestic Debt Exchange program may not receive the exact amount they expect in terms of bonds.

According to him, due to the economic challenges and implied market forces, it is possible that the interest on bonds will decrease.

The MP said this after observing that some companies or individuals have decided to withdraw their bonds after hearing about the Domestic Debt Exchange programme.

The government last Monday launched the Domestic Debt Exchange programme which was first announced in the 2023 budget.

The programme involves the swapping of existing domestic bonds with longer-dated bonds that will take between five and 14 years to mature in 2037.

This means the extension of the repayment period for the bonds issued and held locally to allow for a staggered and phased payment of both the interest and the principal.

The annual coupon on all of these new bonds will be set at zero per cent in 2023, five per cent in 2024 and 10 per cent from 2025 until maturity.

It does not affect treasury bill holders but institutional and individual bondholders registered in the Central Securities Depository (CSD).

However, a couple of hours after the announcement, a number of stakeholders and institutions raised concerns about the arrangement and sought various clarifications, with almost all the groups claiming they had not been consulted.

While the Minority in Parliament said the form and structure of the exercise were counter-productive and it would, therefore, not accept it, the Trades Union Congress (TUC) indicated that it was concerned about the programme’s potential negative impact on workers’ pensions.

A financial advisory firm, Deloitte Ghana, on the other hand, sought some clarity on whether investors would have the option of immediately liquidating their investments or be forced to roll over onto the new programme.

The Ghana Registered Nurses and Midwives Association (GRNMA) also expressed dismay and disappointment at the development, saying pension funds were a collection of contributions of individuals and the managers alone could not decide for all.

Speaking on Atinka TV’s morning show, Ghana Nie with Ekourba Gyasi Simpremu, Dr. Stephen Amoah said if the bondholders can wait until the economy is a bit more stabilised, it is possible that the returns on their bonds will increase.

“Sometimes some people say they have withdrawn their bonds and the money has decreased, it is true, it is not the government that has decreased it, it is not the government’s measures that cause it, it is implied market forces, and so for those saying they will not agree to the Domestic Debt Exchange programme, they have the right to do so and no one can force them, but the truth is that even if you want to go the natural way, the implied market forces can reduce their assets” he said

“The government is not forcing anyone, and it is not going to force anyone to accept what it has proposed, so if you do not agree, it is not a problem; however, as of now, you must either wait for your bond to mature, wait for the economy to improve, or make a panic withdrawal.

"If you do this, the market’s implied forces, not the bank or the government, will reduce your returns, so people should understand this clearly,” he stated.

Dr Stephen Amoah added that the implied market forces were at play all the time, even before the government proposed the Domestic Debt Exchange programme.