The deadline for bondholders to sign up for Ghana’s Domestic Debt Exchange Programme (DDEP) expired on January 16, 2023, amid significant resistance from various groups. Launched on December 5, 2022, the DDEP aimed to address Ghana’s economic challenges by inviting holders of approximately GH¢137 billion in domestic notes and bonds, including ESLA and Daakye bonds, to exchange them for new bonds maturing in 2027, 2029, 2032, and 2037. As the government races to secure a $3 billion International Monetary Fund (IMF) bailout, the programme’s success remains uncertain due to widespread opposition and logistical hurdles.
Details of the DDEP and Its Challenges
The DDEP, a critical component of Ghana’s strategy to restore fiscal stability, offered bondholders new bonds with a zero percent coupon rate in 2023, five percent in 2024, and ten percent from 2025 until maturity, with semi-annual payments. The initiative was designed to reduce the country’s debt burden, which stood at GH¢467.4 billion (approximately $48.87 billion) as of September 2022, with a debt-to-GDP ratio projected to reach 107% by year-end, according to the World Bank. However, the programme faced fierce pushback, particularly from labour groups and individual bondholders.
Initially, pension funds were included in the DDEP, but widespread protests, including threats of a general strike, led to their exemption in late December 2022. This concession shifted the burden onto individual bondholders, who were subsequently included despite initially being excluded. This reversal sparked significant discontent, with groups like the Pensioner Bondholders Forum and the Ghana Individual Bondholders Forum voicing strong opposition. On January 16, 2023, the latter threatened demonstrations, arguing that the inclusion of their investments threatened their financial security.
The Pensioner Bondholders Forum, led by Dr. Adu A. Antwi, intensified pressure by threatening to picket at the Ministry of Finance on January 23, 2023, if pensioners were not exempted. The Forum had petitioned key stakeholders, including the Finance Minister, Speaker of Parliament, and religious councils, but reported no response from the government by January 16. Dr. Antwi emphasized the dire consequences for pensioners, stating, “We are not tendering in our bonds.”
Government’s Response and Deadline Extensions
The government faced mounting pressure as the January 16 deadline approached, with uncertainty surrounding participation rates. While the Ministry of Finance aimed for an 80% subscription rate, holdouts persisted, and it remains unclear how many institutions and individuals signed up by the deadline. To address concerns and build consensus, the government extended the DDEP deadline multiple times, from December 19 to December 30, then to January 16, and later to January 31, 2023, citing technical glitches and the need for further stakeholder engagement.
The Ministry of Finance, in a statement on January 16, emphasized that “building consensus is key to a successful economic recovery for Ghana.” Revisions to the programme included offering a 2% cash fee for holders of 2023 bonds and increasing the number of new bonds to 12, maturing annually from 2027 to 2038. Additionally, negotiations with groups like the Ghana Association of Banks and the Ghana Securities Industry Association led to modified terms, such as a 10% coupon rate for bondholders under 59 and a 15% rate for retirees, with a maximum maturity of five years.
Opposition and Economic Context
The DDEP’s rocky reception reflects broader economic challenges in Ghana, where inflation reached 52.2% in December 2022, and the cedi’s depreciation exacerbated external debt burdens. The programme is a prerequisite for securing IMF board approval for a $3 billion bailout, critical for stabilizing the economy. However, the inclusion of individual bondholders has raised fears of financial distress, with critics arguing that it erodes investor confidence and risks losses for households through direct bond ownership or pension and mutual funds.
Opposition groups, including trade unions and individual bondholders, have demanded exemptions, arguing that the government’s approach lacks burden-sharing across society. Some have suggested that cutting wasteful public expenditure could mitigate the need for such drastic measures. The Ghana Individual Bondholders Forum, for instance, planned a gargantuan demonstration, signaling deep frustration with the government’s handling of the process.
Looking Ahead
Despite the challenges, the government secured 85% participation by February 10, 2023, after five deadline extensions, moving closer to IMF bailout approval. The Ministry expressed gratitude for bondholders’ participation, noting that the alternative—failing to execute the DDEP—could lead to grave disorder in debt servicing and worsen the economic crisis. However, the inclusion of individual bondholders remains contentious, with potential long-term impacts on investor trust and household finances.
As Ghana navigates this critical juncture, the government’s ability to balance economic reforms with the needs of vulnerable groups like pensioners will be pivotal. The extended deadline to January 31, 2023, offers a brief window for further negotiations, but the success of the DDEP and the IMF bailout hangs in the balance as opposition persists.
