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Govt. commended for developing plans to pay SOEs electricity debt

By: Fred Yaw Sarpong

Dr. Mohammed Amin Adam, an Executive Director at Africa Center for Energy Policy (ACEP) has commended the government for developing a five year plan to settle the Electricity Company of Ghana (ECG) GHc728 million debt owed by the State-Owned-Enterprises (SOEs) in the country.

“It’s very important for the government to pay the debt so that ECG will also settle the Volta River Authority (VRA) and Asogli for the power they have produced for Ghanaians to consume,” he added.

Dr. Amin Adam said the plan is one of the conditions of Ghana’s Compact under the Millennium Challenge Account (MCA). “It’s one of the conditions for the government to pay the debt of ECG before money will be disbursed to Ghana. My problem is why should government wait for America to come and tell us to pay the debt,”? he asked.

Secondly, he told the Daily Express that even though government has develop plan to pay the debt, the issue is not about paying the debt but whether government is not going to incur new debt.

“The only way government will avoid additional debt is to find a way to pay the bills for the consumption of electricity by the government agencies,” he pointed out.

“But if the agencies are going to have power from the ECG and they will not pay for it then another debt will be accumulated and that wouldn’t have solve the problem,” he told the Daily Express.

The energy expert said government should find mechanism to pay for the power they consume in order not to accumulate new debt.

He emphasized that there are budgets on power allocated to every Ministry as part of their expenditure. “The problem is that either the monies are not release by the Finance Ministry or if the monies are given to the Ministries they don’t use it for the power consumption but something else.”

He said “it’s the Ministries which have to make sure that electricity consumption is one of the priorities on their expenditure list.”

The Finance Minister, Mr. Seth Terkper announced at a press briefing that the government has conducted an assessment of arrears between the government and SOEs and cross-SOEs‟ arrears and prepared an action plan and a timeline for their elimination

He said this will include improving the repayment the “legacy debt” to ECG in the amount of GHc728 million over five years Significant

According to the Minister, this formed part of the SOE reforms being implemented. He said the reforms are to strengthening monitoring and evaluation; Private sector participation; and strengthening governance.

He said the reforms include the introduction of performance management contracts for senior managers which will include targets for reducing losses as well as a framework facilitating monitoring of SOEs by the Office of the President, the Ministry of Finance, the relevant committee of Parliament and sector Ministry in order to strengthen operational and financial discipline.

Also, there will be evaluation of potential for private sector participation in SOEs; and conducted an assessment of SOE's governance and action plan for reforms being prepared. “This will include strengthening of oversight of SOEs,” he added.

Meanwhile, Mr. Terkper said although a formal agreement has not yet been entered into, in July 2016 lenders (domestic banks) have agreed a framework to the restructuring and repayment of VRA debt of about GHc2.2 billion over 3 to 5 years Key features of the agreement in principle:

He mentioned upfront payment of approximately GHc250 million which will be funded by the new collections from the energy sector levies; reduction of interest rate on the GHC component of the VRA debt from an average of 30% to 22%; and reduction of interest rate on the foreign currency component of the VRA debt from an average of 11% to 8.50%.

Also repayments will be funded from a debt service account which will receive cashflows from (i) the energy debt recovery levy and a debt service reserve; and (ii) a proportion of VRA's receivables; proceeds of the energy debt recovery levy which are applied to VRA debts will be converted into equity on VRA's balance sheet or could be subject to an on-lending arrangement with the government; and government will place limits on the ability of VRA to incur new indebtedness without express approval The government anticipates that this approach will be used to restructure VRA's as well as the debt of other energy-sector SOEs


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