The International Monetary Fund (IMF) has pressed on government to strictly follow roadmaps designed to wean state owned power companies off debts.
According to the IMF, its recent discussion with government also focused on ascertaining the financial pressures faced by the main State Owned Enterprises (SOEs) in the energy sector.
Currently, the Volta River Authority (VRA) owes about 12 banks 4.4 billion cedis, with government paying 250 million cedis last week.
The Finance Minister last week outlined plans in collaboration with the Bank of Ghana(BoG), and the Ghana Bankers Association to pay the debt over a period of 3 to 5 years.
But in a recent visit by an IMF team led by Joël Toujas-Bernaté, the mission pointed out that government must adhere to regulations outlined to clear the debts to avert additional risks on government’s central budget next year.
The mission further stated that the move is pertinent in firming up the fiscal outlook for 2016 and beyond.
Govt’s move to clear debt
The Ministry of Finance, the BoG, and the Ghana Bankers Association announced plans last week to pay the legacy debt owed by the power sector.
According to the Ministry of Finance, government has arranged with the BoG to create an escrow account to transfer 250 million cedis to settle part of the debts owed to 12 banks in the country.
The banks 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.
As at August, 2016, government owed 12 banks, approximately 4.4 billion cedis, after negotiating 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.
Government has made an upfront payment of approximately GHS250 million which will be funded from the energy sector levies.
Placing limits on VRA
Meanwhile, government has placed limits on the ability of the VRA to incur new indebtedness without express approval.