The government has given an indication about reaching an agreement with Independent Power Producers (IPPs) on debt restructuring as part of measures to reduce deficit in the energy sector.
Minister for Finance Dr. Mohammed Amin Adam who gave the indication, said the agreement will be essential in solving the country’s energy sector financial challenges, which have been largely attributed to recent power outages across the country.
Speaking at a media briefing to wrap up Ghana’s activities at the just ended International Monetary Fund (IMF)/World Bank Group (WBG) Spring Meetings in Washington, US, Dr. Amin Adam said government has to pay for the debt accumulated as a result of excess capacity commitments in addition to the payment of legacy debt in the energy sector.
“As a result of these, we have renegotiated with the IPPs to restructure the debt and once we complete the negotiations, the debt overhung, shortfall will reduce. I can tell you that in the next one month, we should be signing off with the IPPs on the restructuring of our debt.
“Once the shortfalls are reduced, we should be working towards bringing the sector into financial sustainability in line with the Energy Sector Recovery Programme,” Dr. Amin Adam added.
Currently, Ghana has some US$1.9 billion energy sector financing gap to tackle, which the Finance Minister during an earlier engagement at the spring meetings said had made the government take the “bullet” to solve.
“We assure investors that while there are challenges, we’re bold as a government to take the necessary bullet for us to put the sector in a more sustainable manner so as to address the challenges that investors are usually worried about,” the Finance Minister stressed.
The reforms include the implementation of the Energy Sector Recovery Programme, which started in 2019, and renegotiation of Independent Power Producers (IPPs) agreements to reduce the cost of generation.
There is also the implementation of a quarterly tariff adjustment review, which accounts for inflation, exchange rate depreciation, and changes in the generation mix, as well as a cash waterfall mechanism.
Consequently, Dr. Amin Adam disclosed the government’s plan to procure some one million revenue efficient meters through a partnership with the World Bank under a Programme-for-Result scheme to shore up revenue and support value chain operational effectiveness.
