The Director of Research at the Bank of Ghana (BoG), Dr. Philip Abradu-Otoo, has said it was the Domestic Debt Exchange Programme (DDEP) that did the magic for the country to secure its bailout from the International Monetary Fund (IMF).
As part of the conditionalities for the country’s eligibility for a bailout from the IMF, the government was required to restructure its debts. Government, therefore introduced the DDEP to reduce the returns bondholders were supposed to receive from their investments.
The durations for the maturity of their coupons were also extended in addition to the reduced returns. The programme was to secure the bailout in order to stabilise the economy.
The Bank of Ghana, in its 2022 Annual Report, recorded a loss of GHC60.9 billion due to what it describes as the impairments that occurred during the DDEP implementation.
Meanwhile, Dr. Abradu-Otoo has been saying the government would have faced severe challenges without the implementation of the DDEP.
He reiterated that the losses the BoG incurred in 2022 was due to the domestic debt exchange programme.
“The biggest one was the impairment we had on the securities that we were holding. Just like any other individual, the BoG was also holding government securities. Out of that GHC60.9 billion, GHC48 billion of that were impairment. That is the losses that we incurred on our books, as a result of the DDEP.
“For the debt exchange programme, nobody had a haircut on the principal…for the BoG, we had the side haircut, and top haircut and the amount itself was cut into two. We had three, we had to do that because we needed that to secure the IMF programme. It would have been tough to move forward very fast. Then we would have come back to the drawing board and relook at the other parts of the DDEP,” he said on Citi TV Monday, June 03, 2024.
When asked if the BoG would have disagreed with the impairment if given the choice, he confirmed, “yeah”.
A Memorandum of Understanding (MoU) for the early recapitalisation of the Bank of Ghana is expected to be signed by the end of the third quarter of this year following the Central Bank’s significant losses for two consecutive years.
The MoU is a strategic move to help restore the financial health of the central bank and drive its positive equity position after it posted a GHC10.5 billion loss in 2023 due to high expenditure related to monetary interventions and a GHC60.9 billion loss in 2022 over impairments during the domestic debt exchange programme.
The Ministry of Finance and the Bank of Ghana will sign the MoU to ensure the central bank can continue with its mandate of managing monetary policy and ensuring price stability.
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