Debt exchange: Financial stability fund confidence booster – PwC

Debt exchange: Financial stability fund confidence booster – PwC

Accounting and advisory firm, PricewaterhouseCooper’s, has lauded the proposed establishment of an investor protection fund by the government to act as a liquidity reserve bank for financial institutions and investors that may suffer losses in the wake of a historic debt treatment exercise.

The firm said the operationalisation of the proposed Financial Stability Fund would help to compensate investors that might be affected by the exercise, leading to increased confidence in the domestic capital market and the debt exchange programme.


In its 2023 Budget review published on November 30, PwC said it foresaw the fund contributing to the restoration of investor confidence.

“An investor protection fund may ensure that investors are compensated in the event of a defaulting debt holders’ asset not being sufficient to meet investors’ admitted claims.

“In our view, this may contribute to the restoration of investor confidence, which appears to be low due to the various rating downgrades and the recent decline in investment valuations.

“Investors will be keen to know the extent of protection, source of funding and the autonomy of the fund as they will expect to draw confidence from this initiative,” PwC said in the review, which was launched at the firm’s post-budget event, the PwC Budget Digest on November 30.


The Minister of Finance, Ken Ofori-Atta, first announced plans to create an investor protection fund on November 24 when he presented the 2023 Budget to Parliament.

The minister said the fund was needed to serve as a shock absorber to possible spillovers from the Ghana debt exchange programme, which he later unveiled on December 5.

At the launch of the programme, Mr Ofori-Atta said the government’s pledge to Ghanaians and the investor community was that the government would take all appropriate measures to safeguard the solvency of the financial institutions involved in the exchange.

“Thanks to well-targeted regulatory measures and the creation of a Financial Stability Fund (FSF), banks, pension funds, insurance companies, fund managers and collective investment schemes will be supported, to ensure that they can to meet their obligations to their clients as they fall due,” the minister said.

“For this reason, the Governor of the Bank of Ghana will follow suit with details of the necessary assistance in due course.

“We have also dialogued extensively with regulators across the Financial Sector, including Securities and Exchange Commission (SEC), National Insurance Commission (NIC) and National Pensions Regulatory Authority (NPRA) to agree that regulatory forbearance will be provided to all entities whose financial positions are adversely affected by virtue of participating in this exchange,” the minister said.


Although independent of the International Monetary Fund (IMF), the debt exchange programme is needed to put the country’s debt on sustainable levels as a precondition to securing a bailout programme from the IMF.

Mr Ofori-Atta said it was also a key requirement to allowing Ghana’s economy to recover as fast as possible from this crisis.

Giving details, he said the exercise would not affect treasury bills as they were completely exempted.

As a result, he said all holders of T-bills would be paid the full value of their investments on maturity.

“Our domestic debt operation involves an exchange for new Ghana bonds with a coupon that steps up to 10 per cent as soon as 2025 (with a first interest payment in 2024) and longer average maturity.

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

“Predetermined allocation ratios are as follows: 17 per cent for the short bonds, 17 per cent for the intermediate bond, 25 per cent for the medium-term bond and 41 per cent for the long-term bond.

“The annual coupon on all of these new bonds will be set at zero per cent in 2023, five per cent in 2024 and 10 per cent from 2025 until maturity,” the minister said.

He said coupon payments would be semi-annual.

“For emphasis, this domestic debt exchange programme will not affect individual bondholders,” he said, noting that it was part of a more comprehensive agenda to restore debt and financial sustainability.


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