On April 14, the Minister of Finance, Ken Ofori-Atta and the Bank of Ghana (BoG) Governor, Dr Ernest Addison, held an engagement with investors on the progress it had made with respect to tackling its sovereign debt crisis. This engagement appeared to have been targeted at external creditors that the nation needs to reach an agreement on how they will deal with the about $30 billion external debt.

One thing that sparked a lot of conversation back home was the announcement of Comprehensive Debt Exchange Operations which would restructure an additional GH¢123 billion of domestic debt. This caught many Ghanaians by surprise because we expected that domestic debt restructuring ended with the Domestic Debt Exchange Programme.

Media reports picked up the news of the new debt exchange programme which the finance minister promptly denied. However, a letter allegedly from the Ministry of Finance to Pension Trustees was sited online about a day later which plans to exchange pension funds’ current holdings of treasury bonds, ESLA bonds and Daakye bonds for two new bonds maturing in 2027 and 2028. These bonds will pay cash coupons of 5% in 2023 and 2024 with the rest of the coupons (which the letter states is 21%) will be paid through an increase in the nominal value of the bonds. This offer is not as punishing as the one the banks signed on but it still represents a restructuring. And organised labour has promptly rejected the offer.

If we are to ignore the pension funds, we still have cocoa bills, domestic dollar bonds, and other loans that we should expect government to offer new terms to current holders. The cocoa bills (GH¢8.1 billion outstanding) are particularly interesting because of a failed auction in January that made the BoG instruct financial institutions to rollover their investments in cocoa bills as not enough was raised to pay off maturities.

For finance wonks, the most fascinating restructuring is the GH¢77 billion owed to the BoG by the government. These funds probably accumulated from matured domestic bonds that the BoG paid on behalf of the government as well as other withdrawals made by the government when the domestic bond market was drying up. How the government restructures this debt would be an interesting accounting exercise and spark a lot of debate about central bank independence and modern monetary theory.

Is it probable that the government will jettison the whole plan for a round two of domestic debt restructuring? Not likely. The government’s struggle to pay bondholders who chose not to participate in the DDEP points to a cashflow challenge which the government needs to address if its to salvage credibility with creditors. It’s therefore more probable that the government will paint a more realistic picture with investors and present them with new terms.

While we await government’s plan on another round of restructuring, we got a hint of the government’s plans for external restructuring. The government has a target of 55% of Debt-to-GDP by 2028. It believes that its fiscal adjustment plans and two rounds of restructuring would bring it to 71% by 2028, meaning that external creditors would need to take a writedown equal to 16% of GDP (71% – 55%) in order to meet its target.

As usual I will be closely watching the government’s restructuring plans and break down the implications for investors on this platform.