Ghana’s energy debt is projected to reach $9 billion by 2027, doubling from $4.5 billion by 2024. The decline in eurobond prices reflects investor concern following Finance Minister Cassiel Ato Forson’s warning at a national economic dialogue. Key factors contributing to this debt include high losses incurred by the Electricity Company of Ghana, market concentration, and low electricity tariffs.
Ghana’s Finance Minister, Cassiel Ato Forson, cautioned that the country’s energy debt may double by 2027 unless immediate actions are taken. This warning resulted in a notable decline in Ghana’s eurobond prices on Tuesday, as the 2035 dollar bonds fell 1.1% to 73.3 cents on the dollar, reaching its lowest point in a month, while the 2030 bonds dropped 0.9% to 77.83 cents on the dollar.
Currently, Ghana’s energy debt stands at $4.5 billion as of the end of 2024 and is projected to rise to $9 billion by 2027. The country is grappling with significant financial pressure resulting from challenges within its energy sector, amidst recovery efforts from a debt default in 2022. Furthermore, Ghana has recently finished reorganizing its $47.5 billion public debt.
The increase in energy debt can be attributed to several key factors. Firstly, the Electricity Company of Ghana (ECG) has reported high losses, only accounting for 62% of the energy it purchases. Secondly, the power generation market remains largely non-competitive, and thirdly, electricity tariffs are set below actual production costs, exacerbating the financial distress.
Forson’s warning was issued during a national economic dialogue in Accra, organized by President John Mahama, who took office in December with commitments to economic reform. Ghana is also in discussions with 60 international banks to restructure $2.7 billion in loans. Mahama has promised to reduce expenditure and fine-tune the IMF’s $3 billion economic program to help restore investor confidence in Ghana, the second-largest cocoa producer globally.
In summary, Ghana faces a critical situation regarding its energy debt, which is poised to double by 2027 without decisive interventions. The combination of high losses, lack of competition, and underpriced tariffs is driving the debt increase. The government is under pressure to reform and regain stability, especially following recent restructuring efforts and ongoing negotiations with international banks.
Original Source: techlabari.com
