Ghanaians should brace themselves up to pay all the debts accrued by the country’s state-owned enterprises which collectively stands at GH¢4.4 billion ($1.2 billion) after government negotiated the interest rate on the dollar component from 11 percent to 8.5 percent, while the cedi component was reduced from 30 to 22 percent.
The amount is yet to be reduced by GH¢250 million, Seth Terkper, Minister of Finance, yesterday told a media briefing in Accra.
It is for this reason that the Bank of Ghana (BoG) and the Ghana Bankers Association have come together to finance the legacy debt owed by the power sector so as to be re-imbursed from levies to be imposed on Ghanaians.
And government has indicated that the amount is expected to be repaid between two and five years.
By the foregoing, Bank of Ghana (BoG) is to create an escrow account to transfer GH¢250 million to settle part of the debts owed to some 12 commercial banks operating in the country.
These include Ecobank, Stanchart, Unibank, Zenith bank, GT bank, UBA, UMB, CAL Bank, Access Bank, Stanbic Bank, Fidelity bank, First Atlantic Bank, Ghana International Bank, among others.
Mr Terkper stated: “As I speak, government has made an upfront payment of approximately GH¢250 million which will be funded by the new collections from the energy sector levies.
“The money is in an account with the Bank of Ghana and will be paid to the banks as planned.”
He stated that government has also negotiated for a reduction of interest rate on the foreign currency component of the VRA debt from an average of 11 percent to 8.50 percent which will cumulatively lead to a reduction in the debt by close to GH¢300 million.
“Energy sector utilities are facing financial challenges which are affecting their viability, necessitating a restructuring and priority repayments of their debts via introduction of special energy levies, automatic tariff adjustments and elimination of subsidies.
These legacy energy utilities debt in arrears are not MOF direct or guaranteed debt but pose some level systemic risk to the banking sector.”
Repayments will be funded from a debt service account which will receive cash flows from the energy debt recovery levy and a debt service reserve, as well as a proportion of VRA’s receivables.
“This will include improving the repayment of the ‘legacy debt’ to ECG in the amount of GH¢728 million over five years,” he declared.
According to Millison Narh, First Deputy Governor of the Bank of Ghana, the Central Bank contracted four reputable auditing firms to value the assets of the SOE in the energy sector to ascertain the viability to pay the debt in the stipulated period.
Alhassan Andani, president of the Ghana Bankers Association, said his outfit was impressed with modalities set by government to use the Energy Sector Levy to pay the debt.
More contributions by Ghanaians
The Energy Debt Recovery Levy will see the introduction of Ghp41 per litre on petrol and diesel, Ghp3 per litre on marine gas oil, Ghp4 per litre on Fuel oil and Ghp37 per kg on LPG.
With the Public Lighting Levy, 5 percent per price of kilowatts (kWh) will be charged on all categories of consumers while in the case of the National Electrification Scheme Levy, 5 percent per price of kWh will be charged on all categories of consumers.
Touching on the Price Stabilization and Recovery Levy, he said consumers would be expected to pay Ghp12 per litre on petrol, Ghp10 per litre on diesel, and Ghp10 per kg on LPG.
The Energy Debt Service Account will be used to manage debt recovery of Tema Oil Refinery (TOR) and the downstream petroleum sector foreign exchange under recoveries.
The Price Stabilization and Recovery Account will provide a buffer for under recoveries on the petroleum sector, stabilise petroleum prices for consumers and subsidise premix and residual fuel oil.
There is also the Power Generation and Infrastructure Support Sub-Account which will support payment of power utility debts, ensure power supply, power generation and infrastructure support recoveries and support power infrastructure risk mitigation, including PRGs.
“VRA has faced severe cash flow and debt service challenges over the last three years, consisting of $358 million, being the gross amounts outstanding in foreign currency denominated facilities granted to VRA (Outstanding Foreign Currency Legacy Debt) and GH¢776.6 million, being the gross amounts outstanding under local currency denominated facilities granted to VRA (Outstanding Local Currency Legacy Debt).”
The lead arrangers are Ecobank Ghana Ltd, Stanbic Bank Ghana Ltd and Standard Chartered Bank Ghana Ltd.
By Samuel Boadi