ACCRA, Dec 4 (Reuters) – Ghana will start a domestic debt swap on Monday, Finance Minister Ken Ofori-Atta said, expressing confidence that the move will help restore macroeconomic stability and end West Africa’s economic crisis for a generation.
Ofori-Atta said in a video address on Sunday that the Ghanaian government has completed a debt sustainability analysis, but did not provide information on external debt plans that international lenders are anxiously awaiting.
“We are confident that these measures will contribute to restoring stability to the macro economy,” he said.
Under the domestic debt swap, the domestic bonds will be exchanged for new maturities in 2027, 2029, 2032 and 2037 and the annual coupon will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until be the growth.
The government is negotiating with the International Monetary Fund for a support program to end the debt crisis.
The local cedi currency has fallen more than 50% against the dollar in 2022, while the central bank raised its lending rate to 27% last Monday after inflation reached 21 years in October.
Ofori-Atta said the government wants to reduce the impact of the debt swap on small investors so that they do not apply the rules to Treasury bills or bondholders. There will also be no haircut on the principal of the bonds, he said.
“It should … strengthen the expectation that Ghana is on the way to the IMF staff level agreement. We expect Ghana to benefit as a result,” said Razia Khan, Chief Africa Economist at Standard Chartered.
“There was little question that Ghana needs the LCY (local currency debt) coupon reduction to restore greater stability. By excluding retail investors, this is likely to be very interesting politically,” he added.
How the plan will affect individuals remains to be determined as many hold bonds through pension funds.
Ofori-Atta says the government will establish a financial stability fund with the support of development partners to help local financial institutions including banks and pension funds to be able to cope with the changes.
“I say to you, nothing will be lost, nothing will be lost, and nothing will be broken. We will, together, take it all back,” he said.
Additional reporting by Rachel Savage Writing by Alessandra Prentice Editing by Alexander Smith
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