Ken Ofori-Atta, the minister of finance, has pleaded with the boards of trustees of pension funds to permit the inclusion of pension funds in the government’s new planned debt restructuring package.
The new idea, according to the minister, aims to free up the government’s cash flow in the years to come while fully compensating the pension funds for the value of their current holdings.
The proposal has been “designed to facilitate the execution of the MoU, satisfying the Financial Needs of the Government while maintaining the Value of the Pension Funds,” the Minister continued.
“The proposed offer entails exchanging your current holdings of Treasury Bonds, ESLA bonds and Daakye Bonds for a menu of the currently outstanding New Bonds (issued in February 2023 and maturing in 2027 and 2028 respectively. New Bond 2027 and New Bond 2028 featuring an average coupon of 8.4 % with a ratio of 1.15x, thus entailing an increase in patrimonial value.”
“This complemented by an additional cash payment of 10% (strip coupon). The stream of coupons to be received as part of this proposal will therefore be 21% compared to the current 18.5% of the outstanding of old bonds,” he added.
He further indicated that “in 2023 and 2024, both instruments will pay 5% coupon in cash and the remainder will be capitalized into the nominal amount of the two bonds in order to comply with the cash constraints and the macro-framework defined under the programme with International Monetary Fund (IMF).”
He says the alternative offer has been designed to “(i) achieve the same average maturity as pension funds current holdings of the old bonds (currently between 4 and 5 years), (ii) achieve a similar average coupon (currently at 18.5%) while(iii) alleviating the cash constraints for the government over the first two years.”
The Finance Minister thus urged the Board of Trustees of pension funds to consider the proposal, indicating that “government is targeting to settle the offer by end of April 2023.”
This request comes after organised labour rejected the inclusion of pension funds in the Domestic Debt Exchange programme.