Ghana’s public debt was 467.4 billion Cedis ($37.4 billion) in September, of which 42% was domestic debt. While presenting the 2023 Budget to Parliament, Finance Minister Ken Ofori-Atta said the debt is now more than 100% of the GDP.

The country is saddled with liquidity challenges. Since the beginning of 2022 government has been struggling to service its debt.  Domestic borrowing has hit the roof and interest rates were consuming about 100% of government revenue. While public debt stock steeply rose to GH¢575.7 billion at the end of November 2022, external component of the country’s public debt alone shot up to GH¢382.7 billion.

A group of pensioners picket Ghana’s Ministry of Finance

To make matters worse, the Ghana Statistical Service (GSS) announced that the prices of housing, water, electricity, gas and other fuels rose the most up 82.34%, followed by furnishings and household equipment at 71.52 percent, and then transport at 71.42 percent. Food and non-alcoholic beverages inflation was at 59.71 percent year-on-year. According to the GSS, inflation for locally produced items was 51.1% while inflation for imported items was 61.9 percent.

Realizing the country was at high risk of debt distress, the government proposed negotiations for a bailout from the International Monetary Fund. To this end, on December 12, Ghana and the IMF reached a preliminary, staff-level agreement on a three-year funding package worth almost $3 billion.

“The staff-level agreement with Ghana is for a three-year program supported by an arrangement under the Extended Credit Facility (ECF) of about $3 billion”, IMF reports. That notwithstanding, this approval by the IMF is contingent on receiving financing assurances from Ghana’s partners and creditors. Thus, at all cost, government of Ghana should reduce its domestic debt to 55% of GDP.

In order to meet IMF’s conditions, government has launched a comprehensive internal debt restructuring. Amidst the debt restructuring process, government announced a voluntary Domestic Debt Exchange Programme (DDEP) early December 2022.

 It seeks to exchange about GHS 137.3 billion (US$11.45 billion) of existing domestic notes and bonds held by various local investors for a package of 12 (initially four) new bonds with different pay-out dates.

What government seeks to do is to amend the interest it promised the bondholder (Ghanaians from whom government borrowed) and the duration for which the bondholder is supposed to obtain his or her principal and interest back. In other words, government would swap the agreement (time and promised interest) it had with the bondholder with a new interest and/or new payment durations.

At the initial stages of the DDE proposals, insurance schemes, securities funds, private investments, non-resident investors and even pension funds would not have been spared. Even individual bonds were somehow affected in the sense that their financial institutions which were included in the DDE programme could not pay holders their principal and interests. Except for lashing out and threats of protests from organised labour unions such as the Health Services Workers’ Union, Trades Union Congress, among others, which compelled government to later exclude pension funds. 

Moving on, individual bondholders have now been included in the programme. Government announced that the Domestic Debt Exchange Program (DDEP) officially closed on Friday, February 10, 2023, with over 80% participation of eligible bonds.

Former Chief Justice Sophia Akuffo

Although, the Ministry of Finance has indicated that the DDE is not mandatory and that no penalty has been clearly laid out for those who do not join the programme, government bondholders fear some undesired consequences. For instance, supposing one’s bond matures, what is the assurance that his or her money would be paid. There is also the likelihood that a holder may lose the interest on his or her bond or even some of their principal.

As at now, pensioners are still spending sleepless nights on protests to government so that they would be entirely excluded in the debt exchange programme because there is nothing good in it for them.

Thus, those who are worried most at this point in time are obviously not the elite who own factories or those in government; rather the lower and middle class who despite the excruciating economic conditions have saved something little out of their earnings to buy bonds against a rainy day or for their future and that of their families.

But one may ask, ‘How did Ghana get to this point? Is IMF’s supposed bailout the only option available to Ghana government? Why can’t government reduce drastically its expenditure? Why can’t Ghana produce what it needs or cut down on importation of goods which it could have easily produced to for local consumption?

Why should ordinary Ghanaians pay dearly for government’s negligence? The Ghana situation is a timely reminder to other Third World countries who think of IMF and its puppets in Africa as savior to be mindful of sailing close to the wind.


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