Debt operation will further worsen plight of local private sector – Mahama

Former President John Mahama has stated that the government’s proposed debt restructuring policy will negatively hit the private sector more.

Addressing the Graduating Class of 2022 at the 13th Graduation Ceremony of Accra Business School,the former leader said due to mismanagement and recklessness of the government over the past five years the private business is in a very poor state now.

“The pending debt operation by the Government is set to worsen the plight of the local private sector. While details have not been made known, the Government’s unilateral offer to pay zero interest in 2023 and a suppressed interest of between 5 and 10 percent will further worsen the situation of the private sector.

“A worst-case scenario is the contemplated compulsory extension of maturities on Government bonds and the haircut investors will have to take if they decide to cash out because they can’t wait that long. People have lost value on their investments and could potentially lose even more,” the former President said.   

Domestic Debt Exchange

Government has announced the modalities of a domestic debt exchange following the conclusion of Debt Sustainability Analysis as part of negotiations with the International Monetary Fund(IMF).

In line with the programme, domestic bondholders are billed to exchange their instruments for new ones, Finance Minister Ken Ofori-Atta said in a televised announcement on Sunday.

According to him, existing domestic bonds as of 1st December 2022, will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032, 2037.

“The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024, and 10% from 2025 until maturity. Coupon payments will be semi-annual,” said the Finance Minister.

Meanwhile, the Finance Minister stressed “There will be NO haircut on the principal of bonds, adding Individual holders of bonds will not be affected.

Also, Treasury Bills were exempted from the haircut as holders will be paid the full value of their investments on maturity.

However, the external debt restructuring parameters will be presented in due course, Mr Ofori-Atta said.