‘Investor Protection Fund’ will restore confidence, but debt exchange programme to spur investment withdrawals – PwC

Auditing and accounting firm, PwC, is upbeat the Investor Protection Fund outlined in the 2023 Budget would restore investor confidence which it describes as low due to the various rating downgrades and the recent decline in investment valuations.

It is however warning that the proposed debt exchange programme is likely to further spur the rate of client investment withdrawals.

This is coming after the capital market has in recent past recorded significant withdrawals of clients’ investments, following speculations about the government’s debt restructuring programme.

However, the government intends to propose an amendment to the Securities Industry Act, 2016 (Act 929) which provides a legal framework for the establishment of the Investor Protection Fund.

In its review of the 2023 Budget, PwC, said an Investor Protection Fund may ensure that investors are compensated in the event of a defaulting debt holders’ asset not being sufficient to meet investors’ admitted claims.

In our view, this may contribute to the restoration of investor confidence which appears to be low due to the various rating downgrades and the recent decline in investment valuations. Investors will be keen to know the extent of protection, source of funding and the autonomy of the Fund as they will expect to draw confidence from this initiative”.

The Securities and Exchange Commission, in a directive dated October 20, 2022, instructed market operators to adopt the Mark-to-Market approach in valuing clients’ investments.

This PwC said this has affected the market value of clients’ investments, thus accelerating the pace of investment withdrawals.

The official announcement of the proposed debt exchange programme, as captured in the 2023 Budget Statement is likely to further spur the rate of client investment withdrawals, potentially creating liquidity challenges for market actors”, it added.

BoG needs support to improve cedi’s performance

On the cedi’s performance, it said the Bank of Ghana would require support from all economic actors, public and private in complying with the foreign exchange policies outlined in the budget statement in order to improve the cedi’s performance against major trading currencies.

It is therefore expected that the Central Bank’s engagement with the International Monetary Fund (IMF) would result in positive outcomes which are expected to curtail the continuous depreciation of the local currency.