The Consumer Protection Agency (CPA) has asked the Finance Minister, Ken Ofori-Atta to revisit the drawing board on his promise of not touching the investments of individuals in government’s DDE programme.
The CPA says the government’s move to include individual bondholders in the Domestic Debt Exchange (DDE) programme will in the long run create financial volatility and cripple the economy in future despite how helpful government sees it to be in the interim.
In a release signed by its Executive Director Saturday, January 14, 2023, it is asking the finance minister why he promised the entire nation of a no haircut on national television but turns around to subject stakeholders to what is more than a haircut. The Nana Prempeh Okogyeabour Aduhene signed document is therefore charging the Finance Minister to reengage the individuals affected by the policy to forestall confidence.
Read below the full statement
CONSUMER PROTECTION AGENCY
14TH JANUARY 2023.
RECONSIDER THE INCLUSION OF INDIVIDUAL DOMESTIC BOND HOLDERS IN THE DOMESTIC DEBT EXCHANGE PROGRAM.
The CPA is calling on the Minister of Finance Hon Ken Ofori Atta to make deed his word when he made a national broadcast on the DDEP and made a categorical statement that individual bondholders will not be affected. However recent engagement with some of these bondholders and some financial institutions proves otherwise. It has therefore come as a surprise to us including the individual bondholders who were assured of a “no haircut treatment” are rather getting almost the skin of their skull almost removed in the current transactions.
Though we strongly believe that the Domestic Debt Exchange programme can be seen as a potentially positive development for the financial market in Ghana by swapping high-interest domestic bonds with lower-interest ones, and though the programme can save the government millions of dollars in interest payments, which could be used to help boost the economy and address other challenges such as inflation and the depreciating cedi.
However, the DDE programme could also have negative consequences for the financial market which might be complex and very much uncertain. While it has the potential to improve the country’s fiscal health and reduce the debt burden, it could also lead to increased volatility in the market most especially on individual bond holders who are mostly in the investment bracket holding the economy.
After a meeting with some of the individual bond holders and listening to their complaints Instructively, one potential impact of the DDE programme is on the attractiveness of the new bonds compared to existing ones, given that the current interest rate on existing bonds hovers around 38.82% for the 2-yr note and 48.71 % for the 20-yr bond, the proposed interest rate of 10% per year may be seen as less attractive and will lead to much losses on their investment.
We are therefore calling on the honourable minister to go back to the drawing board to engage these bondholders and all stakeholders including the members of the parliamentary select committee on finance and the financial institutions for an amicable solution to this matter.
NANA PREMPEH OKOGYEABOUR ADUHENE