Renowned political analyst, Dr. Randy Abbey, has criticized the government for its debt exchange program and alleged 'haircuts' on certain bonds.

Speaking on Metro TV's Good Morning Ghana show on Thursday, February 29, 2024, Dr. Abbey accused the government of being unjust and dishonest to investors who purchased bonds backed by the Energy Sector Levy Act (ESLA) and the Ghana Education Trust Fund (GETFund).

He emphasized that these bonds were meant to be secure, guaranteed by the tax revenues from ESLA and GETFund levies, which remained untouched.

Dr. Abbey argued that the government was breaking its promise to pay the full value of the bonds, imposing 'haircuts' or reductions on principal and interest payments.

In questioning the government's actions, Dr. Abbey highlighted the breach of trust and disrespect towards investors and the public.

He expressed concern that the government appeared indifferent to the feelings and reactions of the people, stating, “You come to me and you tell me ‘look, I have a levy called ESLA. It brings in X amount of money every time. And so I want to use this to raise funds. I am selling ESLA bonds. Come and buy. Or there is a tax handle called the GETFUND levy, this is how much it rakes every month. I am creating a bond for you to come and buy. This is a tax handle, statutory funds are going in. Your money is safe and based on that, I invest.

“These tax handles have not been withdrawn. They have not been reduced. They have not been scrapped. And then you tell me that you won’t pay me what I’m entitled to. And then, after all that, you tell me you will reduce it?”

"It’s like you’ve checked out. You don’t even care how people will feel. Because when you feel how they will feel, you will not act like that."

Dr. Abbey urged the government to honor its obligations and cease playing games with the economy.

Background:

In 2022, Ghana confronted a severe debt crisis jeopardizing fiscal sustainability and international market access. The government initiated a domestic debt exchange program, inviting holders of eligible bonds, including ESLA bonds, to voluntarily exchange them for new bonds with extended maturities and lower coupon rates.

The intention was to reduce the present value of public debt and alleviate pressure on debt servicing. The government assured bondholders of no principal haircuts, only interest payment reductions.

Despite assurances, some bondholders, particularly foreign investors, hesitated to participate, fearing potential devaluation and currency risks.

The debt exchange program was a prerequisite for Ghana to receive a $3 billion IMF bailout, contingent on implementing fiscal consolidation measures and structural reforms.

While the IMF anticipated the debt exchange would restore Ghana’s debt sustainability and market confidence, critics, including analysts and civil society groups, viewed it as a form of default that could harm Ghana’s reputation and credit rating. Calls for transparency and accountability in public debt management ensued.