Haircuts on investments must surely happen – Joe Jackson insists

The Director of Strategy and Business Operations at Dalex Finance, Joe Jackson, is doubting President Nana Addo Dankwa Akufo-Addo’s assurances that there will be no haircuts on investments resulting from a possible debt restructuring.

A section of Ghanaian investors was gripped by fear of losing interest on their investments as a result of ongoing International Monetary Foundation (IMF) negotiations.

Addressing the nation on the ailing economy on Sunday, October 30, 2022, the President assured that “there will be no haircuts, so l urge all of you to ignore the false rumours, just as in the banking sector clean-up, government ensured that the 4.6 million depositors affected by the exercise did not lose their deposits.”

But Mr. Jackson who thinks otherwise said haircuts must happen if the government wants to move the country from the economic mess that has bedevilled the country.

“Haircuts happen all the time, it happens in different jurisdictions, so why is it that we think that Ghana is broke, Ghana cannot pay its debt and yet you can get away with the haircut? Forgive me, it has to happen if we have to get out of this mess… Since we are discussing it, it shows that there is crisis in the horizon,” Joe Jackson added.

The country has witnessed an astronomical increase in fuel prices at the various pumps, coupled with high prices of food and services, as well as the depreciation of the cedi.

While urging Ghanaians to rally behind government’s efforts at turning around the economic crisis, the President in his address assured, “Government is working to secure reliable and regular sources of affordable petroleum products for the Ghanaian market. It is expected that this arrangement, when successful, coupled with a stable currency will halt the escalation of fuel prices and relief to us all”.

What is a haircut in debt restructuring?

A haircut in debt restructuring is yet another unique use of the term “haircut” in finance. Specific to debt restructuring, a haircut is the reduction of outstanding interest payments or a portion of a bond payable that will not be repaid. This condition may arise when a company or country considers restructuring its debt and negotiates new terms with existing bondholders.

Assurance of no haircuts covers principal – Oppong Nkrumah

Information Minister, Kojo Oppong Nkrumah, had clarified that the president’s assurances of no haircuts with respect to money invested in bonds cover just the principals for the time being.

“My understanding is that no principals will be touched. No principals will have a haircut,” Mr. Nkrumah said on the Citi Breakfast Show.