Energy Sector Debt Identified as Key Contributor to Ghana’s debt

Mr. Pierre Frank Laporte, the Country Director of the World Bank (WB) in Ghana, has emphasized the significant impact of Ghana’s energy sector debt on the country’s overall debt challenges.

During an interview with the Ghana News Agency (GNA), Mr. Laporte highlighted the factors identified by the WB that contribute to Ghana’s debt situation. He underscored the deficiencies within the energy sector, such as problems related to tariff systems, management issues, expensive power purchases, and transmission losses, as significant contributors to Ghana’s growing debt burden.

Mr. Laporte pointed out that the imbalance between Independent Power Producers’ (IPPs) production costs and the amount consumers paid for electricity resulted in a surge of debts. This occurred because the government could not fulfill its financial obligations to the IPPs.

Mr. Laporte criticized the government’s expensive Power Purchasing Agreements (PPAs), which burdened the country with the cost of unused energy due to “take or pay contracts.” He noted Ghana had entered agreements at unfavorable rates and prices in recent years, further exacerbating the debt situation.

To address this issue, Mr. Laporte urged the government to undertake reforms in tariff adjustments, manage transmission losses through improved infrastructure, and restructure power purchasing agreements to align with the country’s energy needs.
He regarded the recent tariff increment and approval by the Public Utility Regulatory Commission (PURC) as a positive step, emphasizing that significant progress could be achieved by implementing planned energy sector reforms. Mr. Laporte advised the government to leverage the West African Power Pool to provide affordable electricity to the population and industries.

According to Fitch Ratings, Ghana owes independent power producers a staggering $1.58 billion. Fitch Ratings also revealed that although Ghana initially proposed debt restructuring to the IPPs as part of the External and Domestic Debt Restructuring, the companies objected.

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Source: Omanghana.com