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Explainer: Key pointers of government’s debt exchange programme

In July 2022, Ghana was at the doors of the International Monetary Fund (IMF) seeking a $3 billion support program to help restore its macroeconomic stability and sustain its debt. Moody’s Investors Service has already downgraded Ghana into junk territory, which means there is a likelihood that private creditors will incur abrupt losses should they invest in the country.

On page 35 of the 2023 budget, GH₵ 467,731.32 million is quoted as Ghana’s total gross public debt at the end of September 2022, equivalent to 75.9 per cent of GDP. This compares to the end of December 2021 total gross public debt of GH¢352,086.98 million, representing 76.7 per cent of GDP.

With the inflation rate hitting a record high of 50.3% in November, the depreciation of the cedi, the high borrowing rate, the dire impact of Covid-19, the Russian-Ukraine war, and the disruptions of global supply chains, Ghana’s economy has seen a downturn. 

However, as part of efforts to mitigate the country’s dire economic adversities, the government decided to bring up a debt restructuring plan as a fundamental strategy to get the support it requires from the IMF.

In view of this, the Minister of Finance, Ken Ofori-Atta, announced a debt operation program known as “the invitation to exchange.” The program, officially launched on December 5, 2022, will see approximately GHS137 billion of domestic notes and bonds being exchanged for new ones. The program is imbibed under the umbrella of Ghana’s Domestic Debt Exchange. The government believes the move will stabilize and restore investor confidence in the economy.

Public Debt 2018-2022 (Sept)
20182019202020212022 (Sept)
Total Public Debt (billion ₵)173.1218.2291.6352.1467.4
Domestic Debt (billion ₵)86.9105.5149.8181.8195.7
External Debt (billion ₵)86.2112.7141.8170.3271.7
Public Debt/GDP (%)56.1%61.2%74.4%76.7%75.9%
Rate of Debt Accumulation(%)21.4%26.1%33.6%20.7%32.1%
Source: Ministry of Finance. 

What is Ghana’s domestic debt exchange?

The Domestic Debt Exchange programme is a government initiative that seeks to classify domestic bonds into four categories to create fiscal space as part of preparations to qualify Ghana for an IMF facility and to get Ghana on track to having a stable economy.

Forbes defines bonds as investment securities where an investor lends money to a company or a government for a set period in exchange for regular interest payments. Once the bond reaches maturity, the issuer returns the investor’s money. On the other hand, domestic bonds are bonds issued and traded within a country’s internal market and denominated in that country’s currency.

In a press statement issued on December 4, 2022, the Ministry of Finance announced that at the beginning of 2023, domestic bondholders are expected to accept the government’s invitation to exchange their bonds for a set of four new bonds maturing in 2027, 2029, 2032, and 2037. It added that the interest rates on all of these new bonds will be set at 0% in 2023, 5% in 2024, and 10% in 2025 until maturity. 

Which other investments won’t be affected?

The government has assured that treasury bills will be wholly exempted, and all holders will be paid the full value of their investments on maturity.

It added that there would be NO haircut on the principal of bonds. This basically means the initial sum of money an investor puts into an investment hoping to get interest won’t be affected. Individual holders of bonds will not be affected.

Have institutional bondholders accepted invitations to exchange their bonds?

According to the Daily Graphic, which is a state-owned newspaper, two weeks after the launch, checks reveal that no institutional bondholders have not accepted the invitation to partake in the programme. 

It further added that its sources indicate that “the Central Securities Depository (CSD) was waiting for the consent of institutional bondholders willing to participate in the program that required them to postpone their interest in return for full payment of the principal at a later date”

It added that as of Monday, December 12, no investor had communicated to the CSD its intent to participate in the historical exercise.

Postponement of Debt Exchange Program?

Since no institutional bondholders have confirmed their willingness to participate in the program, the government has extended its Domestic Debt Exchange Programme (DDEP) expiration date to December 30, 2022, with a contemplated settlement date of Friday, January 6, 2023.

In a statement, the government says the extension will provide enough time for the necessary consultations with stakeholders. 

“We also fully considered feedback from the financial sector in relation to the need to secure internal and Executive Board approvals, which are necessary considerations for their participation in the Exchange. This, in some instances, may require emergency board meetings etc. 

The extension also affords the Government of Ghana the opportunity to consider suggestions made by all Stakeholders with the aim of adjusting certain measures acceptable within the constraints of the Debt Sustainability Analysis,” the statement said

Potential financial impact and concerns raised by stakeholders

It is evident to note that individuals who have invested in fund management companies like Ecobank, EDC, and Databank, among others, might be affected because these fund managers have invested in government bonds.

Several stakeholders, including labour unions, have also opposed the programme. These are the Trade Union Congress (TUC), Ghana Mine Workers Union (GMWU), Minority in Parliament, Health Services Workers Union, National Association of Graduate Teachers (NAGRAT), Chamber of Corporate Trustees, Ghana Medical Association (GMA), University Teachers Association of Ghana (UTAG), Pharmaceutical Society of Ghana, the Ghana Securities Industry Association.

These labour unions have argued that the program will negatively affect their pension funds.

For the Pharmaceutical Society of Ghana, they lament the programme might affect funds of the National Health Insurance Scheme (NHIS). The Ghana Insurance Commission has also indicated that its industry will collapse as its members cannot pay their clients’ claims. It revealed that 40 per cent of its total assets for the third quarter of this year were invested in Government of Ghana Securities.

Bank of Ghana’s move to mitigate the programme’s impact on banks?

On the other hand, the Bank of Ghana has taken proactive measures to mitigate any potential impact of the government’s proposed debt exchange program by providing relief to participating banks.

The major reliefs, amongst others, include reducing the Cash Reserve Requirement Ratio (CRR) to 12% on GHC deposits and maintaining a CRR of 12% on foreign currency-denominated deposits to be held in foreign currency. The Cash Reserve Requirement Ratio is the minimum fraction of customers’ total deposits, which commercial banks have to hold as reserves, either in cash or as deposits with the central bank. The other reliefs can be found here.

Also, the Financial Stability Council (FSC) has announced that it has begun a process to establish a fund that will provide liquidity to financial institutions that participate fully in Ghana’s Domestic Debt Exchange programme. Known as the Ghana Financial Stability Fund (GFSF), the Fund is being established with a target size of GH₵15 billion to be provided by the government and its development partners.

IMF reaches staff-level agreement on $3 billion deal with Ghana

On December 12, the International Monetary Fund (IMF) reached a staff-level agreement with Ghana on economic policies and reforms to be supported by a new three-year arrangement under the Extended Credit Facility (ECF) of about US$3 billion. The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems.

As head of the Ministry of Finance, Ken Ofori-Attah has assured that the government is committed to finishing all previous and ongoing engagements to reach a deal with the IMF by 2023.

Meanwhile, an Economist and Professor of Finance, Professor Godfred Bokpin, wants the government to demonstrate enough commitment to getting the buy-in of creditors and complete processes for the approval of the US$ 3 billion bailout from the Fund’s managers and Board. 


The debt exchange program will significantly help mitigate the financial mishaps the country finds itself in, but the various short-term businesses could be affected. Basically, the programme seeks to help restore the country’s macroeconomic stability and sustain its debt to bring the economy back on track. 

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