Policy think tank IMANI Africa has criticised the government’s approach to Ghana’s Domestic Debt Exchange Programme (DDEP), arguing that inadequate stakeholder engagement and poor coordination with creditors undermined efforts to secure broad participation in the restructuring exercise.
In an analysis of the debt exchange process, IMANI said the government’s strategy had stalled because major creditor groups were not sufficiently consulted before the programme was launched.
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The report noted that when government officials met representatives of the banking, insurance and securities sectors at Jubilee House on January 13, 2023, they had not secured any firm commitment from the country’s major institutional creditors to participate in the debt exchange programme.
According to IMANI, creditors raised several unresolved concerns, including the proposed discount rate for valuing new bonds, expected credit losses, the structure of interest payments, legal clauses in the replacement bonds and uncertainty surrounding the proposed Financial Stability Fund.
The think tank argued that these outstanding issues made it difficult for banks and other institutional investors to commit to the programme, despite their willingness to continue negotiations. It added that the government underestimated the potential impact of the debt exchange on the financial sector, including pressure on banks’ capital adequacy, liquidity and employment.
IMANI further contended that the government’s “divide and conquer” approach to negotiations with different creditor groups was ineffective because creditors sought assurances that no group would receive more favourable terms than another.
The report also warned that the inclusion of individual bondholders in the debt exchange programme risked significant political backlash, noting that households were more likely to challenge the policy through litigation and public agitation than institutional investors.
According to IMANI, the government eventually recognised the political implications of the policy and considered restoring exemptions for individual bondholders as part of efforts to preserve public confidence and keep negotiations with the International Monetary Fund (IMF) on track.
The think tank concluded that the government’s failure to build broad national consensus around its economic recovery strategy had weakened the debt restructuring process and delayed Ghana’s efforts to emerge from its most severe economic crisis in decades.
