According to reports, the government may lose GH3.7 billion of the GH3.9 billion in Tier 2 pension contributions if it chooses to restructure its debt.

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Restructuring of the debt will result in lower yields on Tier 2 pension payments, which will affect the maturities of the securities.

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Due to their minimal risk, government bonds have received the majority of the Tier 2 contributions.

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Reports have stated that GH¢3.7 billion of the GH¢3.9 billion Tier 2 pension contributions, representing about 94% held in government securities have the probability of being affected by a debt restructuring programme.

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Conversations on a possible debt restructuring programme have begun popping up as Ghana strives to ensure its debt is sustainable.

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This is because the country is seeking a financial bailout from the International Monetary Fund.

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However, a debt restructuring will affect the returns on investments when the yield-to-maturity period is extended or a ‘haircut’ policy is implemented.

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Debt restructuring simply means when a country or company reviews the terms and conditions of the payment of loans in order payment easier or more flexible.

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A ‘haircut’ policy in debt restructuring, on the other hand, refers to when interest rates on outstanding debts are reduced.

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From this narrative, in the case of Ghana, when debt restructuring happens, returns on Tier 2 pension contributions will reduce thereby affecting the maturities of the securities.

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The Tier 2 contributions have been largely invested in government bonds due to their low-risk factor.

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Meanwhile, a five-member committee has been constituted by the government to lead discussions with financial sector players on Ghana’s debt management.

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The Finance Ministry noted that: “The Committee will be consultative and will among other things lead discussions with the financial services industry and other stakeholders to provide industry-wide inputs and transmit industry concerns on debt management strategy to the MoF and BoG.”

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“The stability of the domestic financial ecosystem is critical to a successful IMF-supported economic programme. The Government will take all necessary steps to protect the sector as we have done in the past,” the statement said on October 11, 2022.

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