Domestic bondholders paid GH¢12bn post-DDEP

By Joshua Worlasi AMLANU & Ebenezer Chike Adjei NJOKU

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Finance minister, Dr. Mohammed Amin Adam has announced that government has paid approximately GH¢12billion to bondholders under the Domestic Debt Exchange Programme (DDEP) since February 2024.

This payment marks a crucial step in the country’s efforts to address its debt crisis and restore financial stability.

He made this known during presentation of the 2024 mid-year budget in Ghana’s parliament.

This, Dr. Adam stated, is proof of government’s commitment to fulfilling its obligations and restoring investor confidence.

“We have paid about GH¢12billion to bondholders under our Domestic Debt Exchange programme since February, to demonstrate our commitment to the programme,” he said.

The DDEP is part of a broader strategy to manage public debt, which has seen a significant increase over the past several years.

According to the finance minister, total provisional central government debt as of end-June 2024 stood at GH¢742billion, equivalent to 70.6 percent of Gross Domestic Product (GDP). This represents a 22 percent increase from the end of 2023, primarily due to depreciation of the cedi and disbursements from creditors.

The debt stock is composed of external debt amounting to                 GH¢452billion and domestic debt of GH¢290billion, representing 60.9 percent and 39.1 percent of the total debt stock respectively.

As a percentage of GDP, external and domestic debt accounted for 43 percent and 27.6 percent respectively.

Dr. Adam highlighted several key achievements in government’s debt restructuring efforts.

Notably, recent successful conclusion of the second review of its Extended Credit Facility (ECF) with the International Monetary Fund (IMF), leading to disbursement of a third tranche worth                      US$360million. This brings the total disbursement to approximately US$1.6billion.

Furthermore, government has completed a Debt Restructuring programme with the Official Creditor Committee (OCC) – covering          US$5.1billion and resulting in approximately US$2.8billion of debt relief. This arrangement means Ghana will not service its debt to official creditors from 2023 to 2026.

In addition, negotiations with Eurobond holders have been concluded, covering US$13.1billion. This agreement will expectedly lead to a cancellation of US$4.7billion debt and provide debt service relief of US$4.4billion between 2023 and 2026.

The finance minister also reported progress in negotiations with Independent Power Producers (IPPs), agreements being reached with five out of seven IPPs. These agreements are projected to save approximately US$6.6billion over the Power Purchase Agreements’ (PPAs) lifetime.

Dr. Adam stressed the importance of these debt restructuring efforts in Ghana’s economic recovery following the 2022 crisis.

He outlined several benefits – including the rapid restoration of macroeconomic stability and debt sustainability, avoidance of steeper fiscal adjustments, creation of fiscal space for development spending and prevention of domestic and external banking crises.

Analysts have cautiously welcomed these developments, stating that the payment to bondholders and progress in debt restructuring are positive steps.

However, concerns remain that the true test will be in the long-term implementation of these agreements and their impact on the nation’s economic growth.

While government’s efforts have shown promising results, challenges remain – especially as the significant increase in total debt ongoing depreciation of the cedi continue posing risks to economic stability.

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