Energy Sector Debt major drive of Ghana’s debt woes— World Bank
World Bank (WB) has identified the country’s energy sector debt as the major contributor to the debt woes Ghana is currently facing.
According to WB Country Director to Ghana, Pierre Frank Laporte, his outfit identified some factors that are driving the country’s debt situations and the energy sector is prominent among the identified factors.
He noted that the deficiencies in the sector characterised by the tariff systems and management issues coupled with expensive power purchases by the state in addition to the transmission losses, were the major problems in the energy sector driving Ghana’s debts.
Mr Laporte said the mismatch between the production cost of the Independent Power Producers (IPPs) vis-à-vis how much consumers paid led to an upsurge of debts since the Government could not make financial commitments to them (IPPs).
He also said the Power Purchasing Agreements (PPAs) the Government had signed were expensive as well as the exorbitant power purchases the country was paying for energy, stressing that it did not use due to the ‘’take or pay contracts.’’
‘’In the case of Ghana, those contracts that have been signed as PPAs are just expensive and the kind of PPAs signed are take or pay. You pay although you do not use it. The fact is that in the past few years, Ghana entered into an agreement at the wrong rate and the wrong price, and it has impacted the debts situation,” Mr Laporte added.
He underscored the need for the government to pursue some reforms in the areas of tariff adjustments, addressing the transmission losses through improved infrastructure and restructuring the power purchasing agreements consistent with the energy demands of the country to reduce a significant portion of the debts.
Mr Laporte acknowledged the progress made thus far via the recent increment and subsequent approval in tariff by the Public Utility Regulatory Commission (PURC), saying much could be achieved if the intended reforms in the energy sector were implemented.
He therefore advised the government to take advantage of the West African Power Poll, to provide cheap electricity for its people and industry.
In other development, the Fitch Ranks identified the energy sector as the biggest driver of the national debt in the West African Country which currently owed independent power producers to the tune of $1.58 billion.
It said the country initially reached out to the IPPs to restructure their debts in view of the External and Domestic Debt Restructuring but the companies objected to the proposal.