Domestic Debt Exchange Programme: Government Annoucnes Plan To Include Pension Funds In Controversial DDEP

Domestic Debt Exchange Programme: Government Annoucnes Plan To Include Pension Funds In Controversial DDEP

  • The government says it is negotiating to include pension funds in the controversial domestic debt exchange programme
  • Finance Minister Ken Ofori-Atta made the announcement on Monday, July 31, 2023, while presenting the 2023 mid-year budget review
  • He also said the DDEP took a toll on banks and other institutions and that the total capital shortfall of the financial sector as of November 2022 stood at about Gh¢23.8 billion

Finance Minister, Ken Ofori-Atta has disclosed to Parliament that there is an ongoing process to include pensions to the tune of GH¢29.2 billion in the Domestic Debt Exchange Programme (DDEP).

Presenting the 2023 mid-year budget review to Parliament on Monday, July 31, 2023, the minister said negotiations are ongoing.

"Government is...negotiating with pension funds (holding an estimated GH¢29.2 billion) in a separate execution arrangement to ensure the full completion of the domestic debt restructuring process by the end of August 2023," he told Parliament.

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Finance minister Ken Ofori-Atta says negotiations are ongoing to include pension funds in debt exchange programme.
Finance minister Ken Ofori-Atta is surrounded by journalists at the finance ministry in Accra. Source: Getty Images.
Source: Getty Images

He revealed that last month the government and Cocoa Board launched the exchange programme worth GH¢8.1 billion for holders of Cocoa Bills and domestically issued US dollar-denominated bonds, $808.99 million.

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The Finance Minister's announcement could trigger a pushback

The announcement on Monday, July 31, could trigger opposition from interest groups.

Last year, the Forum for Public Sector Associations and Unions warned the government not to apply a “haircut” to Tier 2 pension funds as part of DDEP.

At a press conference Chairman of the Forum, Isaac Bampoe Addo said any such decision the finance minister would be breaking the law by touching Tier 2 pensions.

“If the Government was to pursue the restructuring of Ghana’s debt by touching pension funds, placed in government securities, it would be tantamount to the deceit of benefits," Addo said.

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The impact of DDEP has been severe

The Finance Minister was however candid to acknowledge that the impact of the domestic debt exchange on the financial sector has been severe but better than forecasted.

He cited the audited financial results for 2022 recently published by banks and ex-post prudential assessments by Regulators to back his point.

"Stress tests conducted on the financial sector by the relevant Regulators in November 2022 estimated liquidity and solvency risks for banks, SDIs, insurance firms, asset managers, collective investment schemes, pension fund trustees, and regulated pension schemes," he added.

He disclosed that analysis shows an estimated total capital shortfall of the financial sector as of November 2022 stood at about Gh¢23.8 billion.

Government misses E-Levy revenue targets by over GH¢500m

Meanwhile, has reported in a separate story that the government could not meet its revenue target for the electronic transaction levy set for the first half of 2023.

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Mid-year budget: Minority slams Ofori-Atta for saying the economy is getting better

The government missed the electronic transaction levy revenue target sent by over 50%, according to the 2023 budget review

The finance ministry has since revised its revenue targets downward for 2023 by over GH¢1 billion.

BoG posts losses due to domestic debt exchange programme

In other news, the Bank of Ghana lost GH¢55.12 billion due to haircuts that its investments suffered under the controversial Domestic Debt Exchange Programme (DDEP).

BoG's holdings of marketable and non-marketable instruments were exchanged for lower-yielding instruments under the DDEP, the BoG said in its 2022 annual financial statement.

BoG governor Dr Ernest Addison said he was working to ensure that equity was restored to a positive path by the end of 2027.

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