No’Haircuts’On investments

_ Akufo-Addo assures

Story:Yaw Takyi

President Nana Addo Dankwa Akufo-Addo on Sunday 30 October 2022 was very clear and direct while sounding confident that no investor in the domestic pension and investment funds will suffer a reduction in the value of their investments as a result of the deal the Akufo-Addo Administration is negotiating with the International Monetary Fund (IMF). He said:

“I also want to assure all Ghanaians that no individual or institutional investor, including pension funds, in Government treasury bills or instruments will lose their money, as a result of our ongoing IMF negotiations. There will be no “haircuts”, so I 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.”

In what can be described as the first Economic Fellow Ghanaians speech, the President admitted that “…our reality is that our economy is in great difficulty.”

Prior to this speech, there has been speculation upon speculation that Ghanaian bond holders and even those who have investments in Treasury Bills would be made to suffer losses as a result of the IMF deal under negotiation. Many local investors had started a run on banks and investment houses to withdraw investments with some converting their holdings into foreign currency to protect their values.

A number of investment houses have already sent notices to their customers to advice them of options available to them. Two of them warned customers that should they decide to withdraw their investments now, they will suffer losses.

In investment circles, a “haircut” refers to a reduction applied to the value of an asset. It is expressed as a percentage. For example, if an asset – such as holdings of a particular government bond – is worth GHS1million but is given a haircut of 30%, as was being speculated, it means it would be treated as though it has a value of only GHS0.7million. The President’s word promising no haircut if managed well, and given credibility, will prevent a run on investment and pension houses. This is something that was not managed well during the banking crisis in 2017 and 2018.

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