The move is also aimed at improving the financial strength of the State Owned Enterprises (SoEs) in the energy sector and make them competitive.
Vice President Dr. Mahamudu Bawumia disclosed this when he addressed a session at the ongoing Spring Meetings in Washington, DC.
Speaking in an exclusive interview with the Head of the Citi Business News desk, Vivian Kai Lokko on the sidelines, Dr. Bawumia was also confident of increased investments to the SoE’s with the complete repayment of the debt.
“There is a 2.4 billion dollar debt that is hanging over the neck of state owned enterprises…What we are going to do is to issue a 15 year long term bond to deal with this debt,” he stated.
Dr. Bawumia added, “What we will do is that we will have one bond which will take off all those liabilities and government will service those bonds with the ESLA revenues. So it is a meter situation that will allow the space for our energy companies to have stronger balance sheets to grow, invest and attract investments.”
Gov’t debt hit 2.3 billion dollars in 2016
Government’s indebtedness to the energy sector has been cited as one major threat to the growth of the sector.
Documents cited by Citi Business News as at 31st December, 2016 stated that government’s net debt in the Energy sector was 2.3 billion dollars.
A breakdown indicated that net debt to banks and fuel suppliers amounted to 1.3 billion dollars.
A further breakdown also showed that the banks are owed 782 million dollars, while fuel suppliers are owed 440 million dollars.
State owned power producer, the Volta River Authority (VRA) owed the banks to the tune of 782 million dollars.
VRA also contributed 278 million dollars to the 440 million dollars owed fuel suppliers, while TOR contributed 162 million dollars.
Energy Sector Levies Act
The past NDC government in 2015 passed the Energy Sector Levy Act (ESLA) to among others provide revenue to finance the debts.
Government is said to be raking in an estimated 500 million dollars annually from the ESLA.
In Dr. Bawumia’s view, this should lessen the burden in refinancing the 15 year bond aimed at settling the debt in the energy sector.
“This bond which is collateralized against this energy sector levy with 500 million coming in every year, would be very easy to finance.”
In August 2016, the erstwhile NDC government through the Finance Minister at the time, Seth Terkper, restructured the debts owed by the VRA.
As a result, the interest rates for the cedi and dollar components were both renegotiated to give some respite.
Also, a payment plan was agreed upon by the various shareholders.
The NDC government made three separate payments between August and December 2017.
The President of the Ghana Bankers Association, Mr. Alhassan Andani in March this year disclosed to Citi Business
News that about 160 million cedis was expected for the first quarter payment in 2017.
(By: Pius Amihere Eduku)