The Ghana Medical Association (GMA) has called on the government to, as a matter of urgency, take immediate steps to completely exempt pensions and other related funds from its proposed Debt Exchange Programme.

The GMA in a statement issued on Tuesday, 6 December 2022, said it is “troubled and alarmed by the negative impact that the Debt Exchange Programme announced by Finance Minister will have on workers’ pensions in particular and health care delivery in the country.”

It noted that “Tier 2 and Tier 3 pensions contributions held and managed by various pensions schemes, especially public sector pension schemes are very heavily exposed (over 90 per cent) to government bonds including ESLA and Daakye bonds.

“The cuts in bond interests, no coupon payments for 2023 and the spread of principal repayment as announced will result in a significant loss in value of our pensions in real terms over the next 5-15 years and beyond.”

It further noted “with a maximum bond interest of 10 per cent starting from 3rd year, our investments in government bonds will return a negative real return for every time that inflation goes above 10 per cent. 

“Though the government aims for a single digit inflation in the medium to long term, historically, that has been very difficult to achieve in Ghana even in the best of economic years.”

According to the GMA, it believes “these will worsen the already dire situation workers and pensioners will face especially when their meagre pensions have lost significant value owing to the depreciation of the cedi, high inflation amongst others.”

The GMA, therefore, indicated that having put these into consideration, it “rejects the Debt Exchange Programme as announced by the Finance Minister.”

Finance Minister Ken Ofori-Atta on Monday, 5 December launched the debt restructuring where he announced the measures that have been widely rejected by labour.

Read Mr Ofori-Atta’s full address below:

Good Evening Ghanaians,

In the Budget Statement presented to Parliament on November 24th, I announced that government will undertake a debt operation programme.

The broad contours of the Debt Sustainability Analysis has been concluded and I am here this evening to provide some details on Ghana’s Domestic Debt Exchange which will be launched tomorrow.

External debt restructuring parameters will be presented in due course.

Under the Programme, domestic bondholders will be asked to exchange their instruments for new ones.

Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037.

The annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity.

Coupon payments will be semi-annual.

Our commitment to Ghanaians and the investor community, in line with negotiations with the IMF, is to restore macroeconomic stability in the shortest possible time and enable investors to realize the benefits of this Debt Exchange.

The Government of Ghana has been working hard to minimise the impact of the domestic debt exchange on investors holding government bonds, particularly small investors, individuals, and other vulnerable groups.

In line with this:

Treasury Bills are completely exempted and all holders will be paid the full value of their investments on maturity. There will be NO haircut on the principal of bonds. Individual holders of bonds will not be affected.

The government recognises that our financial institutions hold a substantial proportion of these bonds.

As such, the potential impact of this exchange on the financial sector has been assessed by their respective regulators.

Working together, these regulators have put in place appropriate measures and safeguards to minimise the potential impact on the financial sector and to ensure that financial stability is preserved. 

Specifically:

The Bank of Ghana, the Securities & Exchange Commission, the National Insurance Commission, and the National Pensions Regulatory Authority will ensure that the impact of the debt operation on your financial institution is minimized, using all regulatory tools available to them.

A Financial Stability Fund (FSF) is being established by Government with the help of development partners to provide liquidity support to banks, pension funds, insurance companies, fund managers, and collective investment schemes to ensure that they are able to meet their obligations to their clients as they fall due.

These are difficult times and we count on the support of all Ghanaians and the investor community to make the exercise successful.

We are confident that these measures will contribute to restoring macroeconomic stability.

With your understanding and support and that of the entire investor community, we shall overcome our current difficulties, and with the help of God, put our economy back on the path of renewed and robust growth.

As 1st Samuel 30:19 says, nothing was missing, small or great.

I say to you, nothing will be lost, nothing will be missing, and nothing will be broken.

We will, together, recover all.

Thank you and God bless our homeland Ghana.