Ghana’s energy debt is projected to reach $9 billion by 2027, doubling from $4.5 billion. Eurobonds fell sharply following Finance Minister Cassiel Ato Forson’s warning amid ongoing financial strains from the energy sector. Contributing factors include high losses from the Electricity Company of Ghana, lack of competition in power generation, and underpriced electricity tariffs. The government is working on restructuring debts while also focusing on economic reforms to boost investor confidence.
Ghana’s eurobonds experienced a significant decline on Tuesday, following a warning from Finance Minister Cassiel Ato Forson regarding the potential doubling of the country’s energy debt by 2027 if immediate action is not taken. The 2035 dollar bonds fell by 1.1%, reaching a value of 73.3 cents on the dollar—the lowest in a month—while the 2030 bonds dropped by 0.9% to 77.83 cents on the dollar. Currently, Ghana’s energy debt, which stood at $4.5 billion at the end of 2024, is projected to escalate to $9 billion by 2027.
The significance of this warning arises amidst Ghana’s ongoing recovery from its 2022 debt default and the recent completion of a comprehensive restructuring of its $47.5 billion public debt. The country is confronting increasing financial challenges due to a struggling energy sector. Contributing factors to this escalating energy debt include high losses sustained by the state-run Electricity Company of Ghana (ECG) that only recovers 62% of the energy it procures, a lack of competition in the power generation sector, and electricity tariffs set below production costs.
This alarming forecast was presented during a national economic dialogue in Accra, attended by President John Mahama, who has been in office since December and has vowed to implement economic reforms. Concurrently, Ghana is engaged in negotiations with 60 international banks to restructure $2.7 billion in loans. President Mahama has also committed to reducing spending, enhancing the IMF’s $3 billion program, and rebuilding investor confidence in the nation, recognized as the world’s second-largest cocoa producer.
In summary, Ghana’s energy debt poses a significant risk of doubling to $9 billion by 2027 without decisive intervention. This increasing financial strain occurs against the backdrop of the country’s recent debt restructuring efforts and ongoing negotiations with international creditors. Addressing high losses in energy procurement, fostering competition in power generation, and adjusting electricity tariffs are critical steps towards alleviating this pressing issue. Furthermore, the government’s commitment to reform and fiscal responsibility is essential for restoring investor confidence and ensuring economic stability.
Original Source: techlabari.com
