Minister for Finance, Ken Ofori-Atta, has requested that pension funds participate in the government’s new debt restructuring offer, aimed at alleviating the cash constraints on the government in the coming years.
The Minister urged the Board of Trustees of pension funds to consider the proposal, which has been “crafted to facilitate the execution of the MoU, addressing the Government financial needs while maintaining the value of the pension funds.”
According to the Minister, the proposed offer involves exchanging current holdings of Treasury Bonds, ESLA bonds, and Daakye Bonds for a menu of the currently outstanding New Bonds, featuring an average coupon of 8.4% with a ratio of 1.15x, thus entailing an increase in patrimonial value.
The stream of coupons to be received as part of this proposal will be 21%, compared to the current 18.5% of the outstanding old bonds.
In 2023 and 2024, both instruments will pay a 5% coupon in cash, and the remainder will be capitalized into the nominal amount of the two bonds to comply with the cash constraints and the macro-framework defined under the programme with International Monetary Fund (IMF).
The Minister stated that the alternative offer had been designed to achieve the same average maturity as pension funds’ current holdings of the old bonds, currently between 4 and 5 years, achieve a similar average coupon currently at 18.5%, and alleviate the cash constraints for the government over the first two years.
The Minister called on the Board of Trustees of pension funds to consider the proposal, with the government targeting to settle the offer by the end of April 2023. This request comes after organized labour rejected the inclusion of pension funds in the Domestic Debt Exchange program.