© Reuters. FILE PHOTO: A girl walks past a Ghanaian flag outside Cape Coast Castle, Ghana, July 28, 2019. REUTERS/Siphiwe Sibeko
By Christian Akorlie and Cooper Inveen
ACCRA (Reuters) – Ghana will implement a domestic debt restructuring plan on Monday, Finance Minister Ken Ofori-Atta said, expressing confidence that the move will help restore financial stability and end West Africa’s economic crisis for a generation.
Ofori-Atta said in a video on Sunday that the government of Ghana has completed the analysis of its debts, but did not give any information about the plans for foreign loans expected by international lenders.
“We are confident that this will help restore economic stability,” he said.
Under the domestic debt, local bonds will be renewed in 2027, 2029, 2032 and 2037 and their annual coupon will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.
The government is negotiating with the International Monetary Fund to get help to solve the debt crisis.
The local cedi currency has fallen more than 50% against the dollar in 2022, as the central bank raised its interest rate to 27% last Monday after inflation hit a 21-year high in October.
Ofori-Atta said the government wants to reduce the flexibility of credit for small investors so that they do not use the information written on Treasury bills or for bond holders. There will be no more haircuts for the bond chief, he said.
“It should… strengthen expectations that Ghana is moving towards an IMF staff agreement. We expect the Ghana cedi to benefit from this,” said Razia Khan, Chief Africa Economist at Standard Chartered (OTC:).
“There was little question that Ghana needed the LCY (local currency loan) to reduce the coupon in order to restore greater stability. Apart from the traders, this could be very good politically,” he added.
How the plan will affect individuals is not yet known as many will hold bonds through pension funds.
Ofori-Atta said the government should set up a financial stability fund with the support of development agencies to help financial institutions in the country including banks and pension funds to deal with the problem.
“I tell you, nothing will be lost, nothing will be missing, and nothing will be broken. We will recover, together,” he said.