Executive Director for the Africa Centre for Energy Policy (ACEP), Benjamin Boakye, has disclosed that Ghana’s economy becomes unsustainable if government keeps piling debt within the energy sector.

According to him, the initial debt of $1.7 billion owed Independent Power Producers (IPPs) in the country which has shot up to $2.2 billion is worrying. He revealed that government doesn’t seem to have a hold on how to reverse the situation.

“We need to really find a solution to this problem and as I indicated, the entire economy and budget of Ghana becomes unsustainable if we keep piling debt in the energy sector the way we are doing. We are going to be denied all the critical investment that we should expect from government. Already, the public is just paying so much for the energy sector debt and its inefficiencies…”
Benjamin Boakye

Lamenting the state of Ghana’s energy sector, Mr Boakye stated that a closer look at the petroleum products alone exposed levies for legacy debt and levies for Delta, which is intended to pay the IPPs, although “we don’t know where that monies go to”. He explained that in advance countries, petroleum products are taxed to provide good services, real services and bus services, so that the vulnerable in society can be protected.

Nonetheless, he noted that in Ghana, people pay levies and taxes on petroleum products to sustain inefficiencies.

“Even that, debt is still piling. I think this is a sad situation… The promise to deliver a plan according to the IMF programme by end of June, it didn’t happen. We haven’t seen the ESRP phase two, which would have laid down a plan for us to avert the situation. So, we are even delaying in planning to be able to deal with this matter, but as we have it, the debt keeps growing and how we pay it remains a conundrum for all of us.”
Benjamin Boakye

Escalation of debt owed IPPs in the country

Commenting on how debt to IPPs has escalated within weeks, Mr Boakye highlighted that with government’s meeting with the IPPs in the past, there wasn’t much paid to them. He explained that there was a standing agreement to respect the recurrent accruals and be able to defray them as they come, but government hasn’t really lived up to the promise.

“Whoever thought that ECG had some big monies they gave to the IPPs, turns out that it wasn’t money, but it was a promise, with little payments to them. That has not been enough actually to keep the IPPs comfortable and that is why, I don’t know whether they threatened again, but the ministry of finance saw the need to call for a meeting for them to address the issue. I’m hoping that out of that meeting will be a plan that all of us can trust to take us out of the woods.”
Benjamin Boakye

Regarding how legacy debt stands unretired when government is still taking ESLA, the ACEP executive director revealed that originally, proceeds from ESLA was to retire the legacy debt. In light of this, he indicated that the banks were in charge of that arrangement, and at some point, government decided it wanted to rather borrow from the bond market to pay the debt owners and move the debt to the bond market.

“So, essentially what we did was to just change ownership of the debt and ever since, we have kept the debt sitting on the bond market to the extent that at some point, what the ESLA could only do was to pay coupons and not actually amortize the principal. So, the ESLA as we have it, we are just paying coupons with the levies that we are collecting, and the debt sits. Before the debt restructuring, I think the balance was over GHC8 billion… But still there are debts to ESLA that we have to pay coupons on.”
Benjamin Boakye

That notwithstanding, Mr Boakye expressed hope that the IMF programme may be able to bail the legacy debt. However, he noted that without doubt, government will keep paying ESLA levy because it’s not able to tackle the debt itself but only addressing interest payments on the debt.