Apart from a lack of transparency, poor information flow, bad faith and poor treatment of creditor groups, a report put together by Banking Consultant Richmond Atuahene has also revealed that ministry of finance has been reactive instead of proactive with the domestic debt exchange programme.

The report says there are many instances of inconsistency and incoherence with the way the government has handled the whole process and its intended objective.

It said a critical review of the domestic debt exchange programme shows "it is not in line with the best principles for fair debt restructuring for emerging economies".

“The strategy on the above has not been done properly by the Ghana government", the report noted, adding: "The government has failed to inform Ghanaians [of] how much fiscal space the domestic debt exchange" -- if implemented successfully -- "will provide" and whether or not that space is "significant" for the duration of the programme. 

"It has always been narratives; no figures have been attached to the domestic debt exchange programme", the report observed.

An earlier publication by Morgan Stanley Investment Banking Group said it expects a cashflow savings of $7.2 billion between 2023 and 2028.

The debt exchange initiative will release approximately $1.2 billion each year in 2023, 2024, 2025, 2026, 2027 and 2028.

The report said “from our earlier research findings published from the data analysis using NPV [Net Present Value] of the debt exchange of the total PV of bond value of domestic banks, firms and institutions; foreign investors, the Bank of Ghana, retail and individuals, insurance companies, SSNIT and rural and community banks of ¢431.962 billion showed the estimated losses of ¢117.346 billion in NPV to local bondholders with maturity extension from five years to 15 years with an average coupon rate declining from current weighted average of 20.0% to weighted average rate of 9.0% for the 12 eligible new domestic bonds maturing with predetermined ratios of 9% from 2027 to 2031 and 8% from 2032 to 2038”.

“With an overall NPV estimated losses of 58%, banking sector losses including Bank of Ghana and rural and community banks amounted to ¢67.880 billion, a major factor for determining the capital needs of the banks". 

"Furthermore, it is estimated that losses of 35% using NPV of the 23 local banks could amount to ¢41.315 billion and it could impact negatively on both banks’ solvency and liquidity”, it added.

The report said the reform of the fiscal space in the DDEP never included the stricter compliance and enforcement of a Fiscal Responsibility Act 2018, Act 982, which strictly requires that the annual fiscal deficit does not exceed 5% of the GDP, as well as the implementation of a revamped tax administration programme and public sector transformation.

“The way the government has been handling the operationalisation has not been in line with the best practices of the fair debt restructuring for the emerging markets”, the report said. 

“The strategy should have involved first making a convincing case to the market on the prospect of significant cost savings that would contribute to sustainable debt dynamics from voluntary par‐for‐par exchange of expensive bonds with low-coupon, longer-maturity instruments but this has not happened", the report said.

It also noted that “good faith actions should be displayed by the debtor – Government of Ghana", pointing out: "The Ministry of Finance has shown bad faith in dealing all creditors."