Government has expressed its commitment to honour all maturing coupons which have already matured but could not be honoured on the due date.

It has also pledged to pay those that fall due subsequently.

Government admitted to defaulting on its domestic debt obligations a couple of weeks ago but explained that the decision to default was purely based on the Domestic Debt Exchange Programme (DDEP) which was ongoing at the time.

It further noted that once the exercise had been completed, the way was clear for the government to honour its obligation to domestic bondholders who did not participate in the DDEP.

A Deputy Minister of Finance, Dr John Kumah, gave the assurance when contributing to a radio talkshow at the weekend.

As at the beginning of the month, almost GH¢5 billion in bonds had matured but none of the bondholders received their due forcing further agitations.

The government, at that period, was racing against time in its quest to achieve a minimum of 80 per cent participation in the DDEP which was meant as a major step towards convincing the country’s foreign bondholders to also accept the conditions under which the government was seeking a debt treatment.

Default consequences

The domestic debt default forced international ratings agency, Fitch Ratings, to downgrade Ghana’s creditworthiness to further junk status.

In its latest report on Ghana, it said “Fitch Ratings downgraded Ghana’s Long-Term Local Currency (LC) Issuer Default Rating (IDR) to Restricted Default (RD) from ‘C’.”

It attributed the downgrade to the decision by government to embark on the debt exchange programme and the recent default on local bonds that matured on February 6, 2023 and another one which was due for payment last week.

“The downgrade of Ghana’s local-currency denominated debt follows the completion of a domestic debt exchange offer by the Republic of Ghana. This transaction is an element of the recovery programme for which the government is seeking the support of the International Monetary Fund for a three-year Extended Credit Facility (ECF) of about $3 billion”.

Fitch also affirmed Ghana’s Long-Term Foreign Currency (FC) IDR at ‘C’, saying, “Fitch typically does not assign Rating Outlooks to sovereigns with a rating of ‘CCC+’ or below”.

“Fitch also affirmed the LT FC IDR at ‘C’, but will downgrade it to ‘RD’ after the end of the grace period for this coupon payment that expires on Feb. 17, 2023”, it said

Meanwhile, it is not clear whether the government is ready to meet its obligations this week.

Desperate actions

Analysts say the government was very much aware of the consequences of its default but added that, it had little or no option because it was not sure of the outcome of the DDEP.

The desperate measures by government as far as the DDEP was concerned is to, among others things, bring its debts to sustainable levels by 2028.

One of the major preconditions to secure the $3 billion International Monetary Fund (IMF) bailout was for the government to bring its debts to sustainable levels and restore macroeconomic stability within the short to medium term.

The deputy finance minister said, with the DDEP done, the government now had a better picture of the way forward and was committed to do as expected of it to restore calm and certainty in the markets.

He was confident that once the domestic issues were cleared, the attention to the foreign bondholders would be pursued more aggressively.

source: graphiconline