CAPE COAST TECHNICAL UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT STUDIES

DEPARTMENT OF ADMINISTRATION AND MANAGEMENT STUDIES

COURSE NAME: BUSINESS FINANCE

COURSE CODE: BSM 412

BENEDICTA AGAWU

Bt0114

ASSIGNMENT 1
1. What is the domestic debt exchange programme
2. Why is Ghana embarking on the domestic debt exchange programme
3. What is the difference between domestic exchange programme and hair cut?
Question 1
It involves an exchange for new Government of Ghana bonds with a coupon that steps up
to 10% as soon as 2025 and longer average maturity. This domestic debt exchange is part of a
more comprehensive agenda to restore debt and financial sustainability.
On 5th December 2022, the Government of Ghana launched Ghana's Domestic Debt
Exchange programme, an invitation for the voluntary exchange of approximately GHS137
billion of the domestic notes and bonds of the Republic, including E.S.L.A. and Daakye bonds,
for a package of New Bonds to be issued by the Republic

Question 2
The objective is to reduce the excessive burden created by our debt on our economy and
reach the debt sustainability targets defined by the IMF staff for the period through 2028 and
beyond. In particular, to restore debt sustainability, we plan to reduce our total public debt-to-
GDP ratio to 55% in present value terms.
The debt exchange programme is to allow our country to restore sound public finance and
sustainable debt levels, and to kick start economic growth following the impact of the COVID.
And also to restore debt and financial sustainability.

Question 3
A haircut informal to agree to accept less money for something They may have to take a
haircut on their investment. In financial markets, a haircut refers to a reduction applied to the
value of an asset. It is expressed as a percentage.
When a bank takes a 'haircut', it means it accepts less than what was due in a particular loan
account. Example: if a bank was owed Rs 10,000 by a borrower and it agrees to take back only
Rs 8,000, it takes a 20% haircut. Banks do this for accounts where chances of making a full
recovery are bleak.
Domestic debt Exchange programme involves the swapping of existing domestic bonds
with longer-dated bonds that will take between five and 14 years to mature in 2037.