Ken Ofori-Atta
Ghana’s Finance Minister Ken Ofori-Atta has revealed in a recent press conference that the legacy debt in the country’s energy sector has reached $2 billion.
He explained that debt emanated largely from Independent Power Producers (IPPs) in the value chain in the sector signed by former President John Dramani Mahama which the sector has been prioritised for comprehensive reforms.
Part of this debt he mentioned includes liabilities from State Owned Enterprises (SOEs) such as COCOBOD and those in the energy sector, represents a significant burden on Ghana’s economy.
Mr Ofori-Atta said “with legacy debt in the Energy Sector reaching about US$2 billion as at the end of May 2023, and an estimated shortfall of US$5.9 billion between 2023 and 2025, due to the current conditions of SOEs and Independent Power Producers (IPPs) in the value chain in the sector, the sector has been prioritised for comprehensive reforms.
“It is expected that structural reforms in the sector should reduce the shortfall by at least US$2.95 billion over the period.”
Ofori-Atta stated that structural reforms are being implemented to address this issue and transition from central government to general government operations.
The Finance Minister emphasized the importance of better governance standards for these institutions to address their liabilities and promote their growth.
He highlighted the need for collective reform and commitment to wide-ranging and strong structural reforms in areas such as tax policy and administration, expenditure control, financial stability, governance and corruption, debt management, and energy sector reforms.
With an estimated shortfall of $5.9 billion between 2023 and 2025, due to the current conditions of SOEs and Independent Power Producers (IPPs) in the energy sector, comprehensive reforms have been prioritized in this sector.
Ofori-Atta expects that these reforms will reduce the shortfall by at least $2.95 billion over the specified period.
It is worth noting that Fitch Ratings previously reported that Ghana’s national debt was largely driven by the energy sector, with the country owing independent power producers a staggering $1.58 billion.
While Ghana initially approached these IPPs to restructure their debts as part of external and domestic debt restructuring, the companies objected to the proposal.
The Finance Minister’s announcement sheds light on the challenges facing Ghana’s energy sector and the government’s efforts to address the legacy debt and implement structural reforms.
These measures aim to improve governance, reduce the shortfall in the sector, and ultimately strengthen Ghana’s economy.
By Vincent Kubi