After more than five months of exemption, the government has taken a sharp U-turn to include pension funds in the domestic debt treatment. Sources say the government is hoping to restructure about $2.7 billion owed to pension funds in a new round of talks.

General Secretary of the Ghana Federation of Labour, Abraham Koomson has told JoyNews the association is yet to receive an official proposal from the government for a possible ‘haircut’.

“We have a committee which is responsible for such meetings so as of now we have not been formally or officially invited to any such meeting." However, he disclosed that the association is expecting the government to approach them with a proposal for a ‘haircut’ and that government wanted such a negotiation in April 2023. 

“We are expecting them to call…they wanted such a meeting in April but unfortunately the technical team had left for Bolgatanga for the May Day celebration so that meeting didn’t come on, but we are expecting that government will come back with a new date” he stressed.

When the government revealed plans to carry out a Domestic Debt Exchange Programme (DDEP), the first group to request for exemption was Organised Labour – they simply told the Finance Minister, Ken Ofori-Atta to stay away from pension funds.

After several weeks of protests and threats of strikes, the government finally surprised Labour with a ‘Christmas present’ by agreeing to go ahead with the DDEP without touching pension funds.

“Government has decided to grant exemption to all pension funds in the DDE programme” Organised Labour disclosed at a press conference on December 22, 2022.

More than five months after this assurance, Labour has been asked to come back to the negotiation table for fresh talks on the wheels of improved restructuring terms.

https://www.youtube.com/watch?v=R4_W9vAT5Qs

Abraham Koomson, the labour federation's General Secretary, who was present for the signing of the exclusion agreement, said all strike plans had been dropped following the agreement in December 2022.

Mr Koomson said the Finance Ministry agreed to drop pensions from the programme only if labour groups could arrange some sort of alternative plan with the central bank. He disclosed that Labour unions had begun engaging the central bank.  

According to data from the Central Securities Depository Pension, funds held 6% of Ghanaian domestic public debt worth 181 billion cedis ($20.1 billion)  as of September ending 2022.  The Finance Ministry is hoping to shave off around 30 billion cedis ($2.7 billion) of pension funds in news rounds of debt treatment talks with Labour.

In February 2023, the government managed to successfully prune about 83 billion cedis of its domestic debt with a participation rate of 85%—excluding T-bills and bonds held by pension funds—with a combined average maturity of 8.2 years.

It’s clear the restructuring of more than 80 billion cedis of domestic debt isn’t enough to secure debt sustainability in the medium-term. The government is trying hard to rope in both pension funds and Independent Power Producers (IPPs), who have a combined weight of more than $4 billion on the West African nation's debt portfolio worth $40.4 billion. IPPs have refused at least two restructuring calls from the Ghanaian authorities and are threatening to cut power generation should government insist on including them in the debt talks.

Downgrades have started popping due to the government’s inability to pay both coupons and maturing principals.  Another group, pensioner bondholders' forum have been picketing at the finance ministry for days demanding payment of coupons and principals due them.

The calling-back of groups initially exempted from the DDEP sends shock waves across the investor community and creates uncertainty in this space. Assurances have simply become disappointments. First, President Akufo-Addo assured all investors that “there will be no haircuts.” Twenty-four days later, a Deputy Finance Minister, John Kumah, disclosed that “for foreign bondholders, the government is proposing a 30% haircut on both principal and interests.”

Second, was Ken Ofori-Atta’s assurance that the current “domestic debt exchange programme will not affect individual bondholders.” This lifeline could not stay long on the exemption list as the government reversed this decision barely eighteen days after.

Without any condition, the government also indicated that “treasury bills are completely exempted and all holders will be paid the full value of their investments on maturity.”

However, page 13 of the Amended and Restated Exchange Memorandum states “treasury bills issued by the Republic and certain non-marketable securities issued by the Republic are not subject to this Invitation to Exchange.

Such treasury bills and non-marketable securities may, however, be the subject of other exchanges and purchases by the government of Ghana from time to time.”

With this condition in full swing, experts say the government may make a U-turn to include treasury bills in their quest to slash domestic debt to a sustainable level.  

For domestic creditors, the information on the DDEP continues to swing like a pendulum and investors have been left at the mercy of flip-flops at such a crucial moment.

External creditors whose assurances helped Ghana to obtain the $3 billion bailout package are watching on keenly and will be taking cues from what is happening in the domestic arena.