IMF: Government targets energy sector to drive economic growth— Ken Ofori-Atta
Ken Ofori-Atta, the Minister of Finance has reiterated government’s plans to prioritise the energy sector as part of a comprehensive host of structural reforms aimed at driving Ghana’s economic growth and development.
According to him, the energy sector plays a crucial role in economic growth, therefore prioritising the sector will be a surest way to help in the developmental agenda of the country.
Addressing journalists in the first of a series of press conferences on Ghana’s International Monetary Fund (IMF) programme and Growth Agenda, Minister Ofori-Atta Ofori-Atta emphasised the crucial role of the energy sector and reaffirmed the government’s commitment to implementing necessary reforms to ensure its efficiency and sustainability.
“We are committed to addressing the challenges in the energy sector head-on. The comprehensive reforms outlined in the Energy Sector Recovery Plan are aimed at reducing losses and improving financial stability within the sector. Our goal is to create a sustainable and efficient energy sector that supports Ghana’s overall growth agenda,” he said.
With legacy debt reaching a staggering US$2 billion by the end of 2022, coupled with an estimated shortfall of US$5.9 billion between 2023 and 2025, the country’s energy sector has been in dire need of reforms to serve the over 30 billion Ghanaian population.
To tackle this energy sector problem, the minister said an updated Energy Sector Recovery Plan (ESRP) was being developed and was set to be approved by the end of June 2023 highlighting the incorporation of key reforms into the ESRP to alleviate the financial burden and foster sustainability.
As part of these reforms, he said government would operationalise a framework for granting energy sector subsidies, implementation of an inter-utility debt settlement framework on a quarterly basis starting from June 2023, and establish a mechanism to enforce the guidelines of the Cash Waterfall Mechanism (CWM) and Natural Gas Clearinghouse (NGC) by the end of June 2023.
He said these measures would contribute to reducing the estimated financial shortfall by at least US$2.95 billion over the period from 2023 to 2025 by streamlining financial processes, enhance transparency, and improve cash flow management within the sector.
Mr. Ofori-Atta explained that as the country continued to pursue its IMF programme and Growth Agenda, these energy sector reforms served as a crucial step toward achieving a sustainable and thriving energy sector that benefit the entire nation.
He said Ghana would receive additional $3.2 billion from bilateral institutions between now 2023 and 2026 to finance the budget and development projects to bring the economy back on the path of growth.
Mr Ken Ofori-Atta said the funds would come from institutions such as the World Bank and the African Development Bank.
He said the concessional financing would help bring the country’s debt to 55 per cent of Gross Domestic Product by 2028.
“We expect the World Bank to provide a total support of $1.6 billion, whilst the AfDB provides a total support of $200 million over the programme period. In addition, we expect to mobilise catalytic funding if $30 million in 2023 and $330 million between 2023 and 2026 from bilateral creditors,” he stated.
Mr Ofori-Atta said the country had started on the path of recovery, adding that the economy was seeing signs of recovery with inflation coming down.
“We are certainly at the beginning of a promising journey towards not just recovery, but also resetting our economy. As a number of you have said to me we have turned the corner,” he stated.
“Against a complex global economic backdrop, the Ghanaian economy is showing signs of stabilisation, with softening inflation, an increase in international reserves, and less volatile exchange rate,” Mr Ofori-Atta added.
After 10 months of discussions and negotiations, Ghana has finally received approval from the Executive Board of the International Monetary Fund (IMF) for a three-year budget support programme aimed at restoring macroeconomic stability and debt sustainability.
The extended credit facility (ECF) which would see the country receive $3 billion is also expected to support structural reforms and help its economic recovery after two years of economic challenges.