The Trades Union Congress (TUC) says it was “gravely concerned about the government’s Domestic Debt Exchange (DDX) programme because of its potential negative impact on worker’s pensions.
“We are equally concerned about the lack of prior engagement with Labour given that substantial portion of worker’s pension is invested in government bonds,” a statement dated December 5, 2022, signed and issued by the Secretary of the TUC, Dr Yaw Baah said.

“We have taken special note of the statement by the Minister of Finance that the Debt Exchange Programme is voluntary.


“The TUC will scrupulously analyse the propriety or otherwise of the participation of pension funds of its members in the programme.”

“We are assuring workers, that the TUC and its Affiliate Unions will do everything in our power to ensure that our members are fully protected and that not even a pesewa of pension funds is lost in the Debt Restructuring Programme.”

“We are therefore, appealing to all workers and unions to remain calm as we work to protect our retirement funds.




The TUC’s reaction followed the government’s move to rely on a softer payment plan with institutions and individuals who have lent money to the country as part of efforts to reduce the burden the public debt stock puts on the economy.

The plan, which is in line with the government’s commitment to restore macroeconomic stability in the shortest possible time, involves the swapping of existing domestic bonds with longer-dated bonds that will take between four and 14 years to mature in 2037.

This means the extension of the repayment period for the bonds issued and held locally to allow for a staggered and phased payment of both the interest and the principal.


GDX

The plan, known as the Ghana Domestic Debt Exchange (GDX) programme, will see domestic bondholders being asked to exchange their instruments for new ones.

In a public broadcast Sunday night and at the official launch of the programme on Monday, the Minister of Finance, Ken Ofori-Atta, said under the programme, existing domestic bonds as of December 1, 2022 would be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

The annual coupon (interest) on all the new bonds would be set at zero in 2023, which meant that next year none of the bonds would receive interest payment due the holders until at maturity, he said.


However, in 2024, the bonds would assume five per cent interest and 10 per cent from 2025 until maturity, he added.

Mr Ofori-Atta said the coupon payments would be paid twice every year (semi-annually).

The extension of the maturity period (tenor) and the phased coupon payments are expected to create fiscal space for the government to be able to invest in productive sectors of the economy to spur growth.


It will also bring the country’s debt levels to the position required by the International Monetary Fund (IMF) for countries seeking assistance from it to rebalance their books.

It is also expected to complement both expenditure rationalisation and revenue-enhancing measures outlined in the 2023 Budget and enable the country to unlock the IMF programme disbursements, which is critical to mitigating the current pressure on public finances, the Ghana cedi and inflation.

No haircut

The minister indicated that the government had been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds, particularly small investors, individuals and other vulnerable groups.

In line with that, he said, treasury bills had been completely exempted and all holders would be paid the full value of their investments on maturity.

“There will be no haircut on the principal of bonds. Individual holders of bonds will not be affected,” Mr Ofori-Atta said.

He said given that the financial institutions held a substantial proportion of the bonds, the potential impact of the exchange on the financial sector had been assessed by their respective regulators.

Working together, the regulators – the Bank of Ghana, the Securities and Exchange Commission, the National Insurance Commission and the National Pensions Regulatory Authority – had put in place appropriate measures and safeguards to minimise the potential impact on the financial sector and ensure that financial stability was preserved, Mr Ofori-Atta said.

The measures would ensure that the impact of the debt operation on financial institutions was minimised, using all regulatory tools available to them, he said.

 

Source: graphiconline

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