Business, General News

Gov’t to establish Financial Stability Fund amid GDX regime

Government has announced the establishment of a Financial Stability Fund (FSF) in collaboration with development partners to provide liquidity support to banks, pension funds, insurance companies, Fund managers, and collective investment schemes.

This, according to the Finance Minister is to ensure they meet their obligations to clients as they fall due.

In an address on Sunday on the possible haircuts on all bonds and treasury bills following government’s debt restructuring deal with the International Monetary Fund (IMF), Mr. Ofori-Atta said the relevant regulators (BoG, SEC, NIC) in the financial space “will ensure that the impact of the debt operation on your financial institution is minimized, using all regulatory tools available to them.”

He added: “These are difficult times and we count on the support of all Ghanaians and the investor community to make the exercise successful. We are confident that these measures will contribute to restoring macroeconomic stability. With your understanding and support and that of the entire investor community, we shall overcome our current difficulties. and with the help of God, put our economy back on the path of renewed and robust growth.”

Government has announced the modalities of a domestic debt exchange following the conclusion of Debt Sustainability Analysis as part of negotiations with the International Monetary Fund(IMF).

In line with the Ghana Debt Exchange(GDX) programme, domestic bondholders are billed to exchange their instruments for new ones, Finance Minister Ken Ofori-Atta announced at a Presser on Sunday.

According to him, existing domestic bonds as of 1st December 2022, will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032, 2037.

“The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024, and 10% from 2025 until maturity. Coupon payments will be semi-annual,” said the Finance Minister.

Meanwhile, the Finance Minister stressed “There will be NO haircut on the principal of bonds, adding Individual holders of bonds will not be affected.

Also, Treasury Bills were exempted from the haircut as holders will be paid the full value of their investments on maturity.

The Finance Minister noted that government has concluded the broad contours of the debt sustainability analysis and details on Ghana’s domestic debt exchange will be launched on Monday, December 5, 2022.

However, the external debt restructuring parameters will be presented in due course, Mr Ofori-Atta said.

Source: Ghana/ Fm

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