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Finance Minister Presses for Inclusion of Pension Funds in Proposed Offer Despite Their Denials

The Finance Minister of Ghana, Ken Ofori-Atta, has called on the Board of Trustees of pension funds to consider including pension funds in the government’s proposed debt restructuring offer. The Minister explained that this proposal aims to alleviate the government’s cash constraints while fully compensating the Pension Funds for the value of their current holdings. This announcement follows organized labor’s rejection of the inclusion of pension funds in the Domestic Debt Exchange program.

The Finance Minister’s release stated that the proposed offer has been “crafted to facilitate the execution of the MoU, addressing the Government financial needs while maintaining the value of the pension funds.” The offer involves exchanging current holdings of Treasury Bonds, ESLA bonds, and Daakye Bonds for a menu of outstanding New Bonds. These bonds were issued in February 2023 and mature in 2027 and 2028, respectively.

The New Bond 2027 and New Bond 2028 have an average coupon of 8.4% with a ratio of 1.15x, resulting in an increase in patrimonial value. The government hopes that the offer will enable it to manage its finances in the coming years while ensuring that pension funds’ value remains unchanged.

The government has proposed a new offer to pension funds regarding their holdings of old bonds. The proposal includes exchanging the old bonds for new ones, which will pay a 10% cash payment (strip coupon) in addition to a stream of coupons at a rate of 21%, compared to the current rate of 18.5% of the outstanding old bonds.

The new bonds will pay a 5% cash coupon in 2023 and 2024, with the remainder being capitalized into the nominal amount of the bonds. This is to comply with cash constraints and the macro-framework defined under the program with the International Monetary Fund (IMF).

The alternative offer aims to achieve the same average maturity as the pension funds’ current holdings of the old bonds, which is currently between 4 and 5 years. It also aims to achieve a similar average coupon rate of 18.5%, while alleviating cash constraints for the government over the first two years.

The Minister of Finance, Mr Ofori-Atta, has urged 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

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