Ministry of Finance requests to participate in GOG pension funds

In a recent announcement, Finance Minister Ken Ofori-Atta has called on the Board of Trustees of pension funds to include pension funds in the government’s proposed debt restructuring offer. The aim of the proposal is to ease cash constraints on the government in the coming years while fully compensating the Pension Funds for the value of their current holdings. This proposal has been designed to facilitate the execution of the Memorandum of Understanding (MoU), which addresses the government’s financial needs while maintaining the value of the pension funds.

The new offer proposes exchanging current holdings of Treasury Bonds, ESLA bonds, and Daakye Bonds for a menu of currently outstanding New Bonds, which were issued in February 2023 and mature in 2027 and 2028 respectively. The New Bond 2027 and New Bond 2028 feature an average coupon of 8.4% with a ratio of 1.15x, entailing an increase in patrimonial value, 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 old bonds.

Both instruments will pay a 5% coupon in cash in 2023 and 2024, with the remainder 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). The alternative offer has 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%), while alleviating the cash constraints for the government over the first two years.

The Finance Minister urged the Board of Trustees of pension funds to consider the proposal, and the government aims to settle the offer by the end of April 2023. This proposal comes after organized labor rejected the inclusion of pension funds in the Domestic Debt Exchange program. The government hopes this new proposal will be a mutually beneficial solution to the cash constraints it faces while maintaining the value of pension funds.

SOURCE: Coverghana.com.gh