Is the Government pushing financial liabilities to a future administration? Businessman Senyo Hosi raises concerns
Businessman Senyo Hosi has accused the Akufo-Addo government of transferring a significant portion of Ghana’s financial obligations to future administrations through the newly proposed Domestic Debt Exchange Programme (DDEP). Hosi expressed his concerns during an appearance on the TV3 program Business Focus with Paa Kwasi Asare on Monday, April 17th.
He noted that the government is postponing a significant portion of its financial obligations on pensions to future governments. The government is presenting the Proposed Alternative Offer for Pension Funds as a solution. However, many people view this program as a new debt exchange initiative. Organized Labor has expressed its dissatisfaction and has cautioned that the deal reached in December regarding the exclusion of worker pensions from the exchange program remains unchanged.
The Ministry of Finance has reportedly requested the Board of Trustees of Pension Funds’ participation in the new program, which has been designed to facilitate the execution of the Memorandum of Understanding while protecting the pension funds’ value.
The sector Minister, Ken Ofori-Atta, explains that the proposed offer involves exchanging the current holdings of Treasury Bonds, ESLA bonds, and Daakye Bonds for a menu of the currently outstanding New Bonds, which were issued in February 2023 and mature in 2027 and 2028, respectively.
The New Bond 2027 and New Bond 2028 have an average coupon of 8.4% with a ratio of 1.15x, thus leading to an increase in patrimonial value. Additionally, a 10% cash payment will be made as part of the proposal. This implies that the stream of coupons received under the proposal will be 21%, compared to the current 18.5% of the outstanding old bonds.
“In 2023 and 2024, both instruments will pay 5% coupon in cash, and the remainder will be capitalized into the nominal amount of the two bonds in order to comply with the cash constraints and the macro-framework defined under the program with International Monetary Fund (IMF),” Ofori-Atta added.
In a nutshell, while the Ghanaian government’s new Domestic Debt Exchange Programme appears to offer a way for the country to meet its financial obligations while maintaining the value of its pension funds, many experts, including businessman Senyo Hosi, believe it is merely pushing liabilities onto future administrations. Additionally, organized labor remains unsatisfied with the program, and the Ministry of Finance is requesting the Board of Trustees of Pension Funds’ participation in the new program.