Ghana’s energy debt may double to $9 billion by 2027, according to Finance Minister Cassiel Ato Forson. Recent declines in eurobonds reflect investor anxiety following the country’s past debt default and ongoing economic restructuring. Key issues include high energy losses, lack of competition in the sector, and underpriced tariffs that exacerbate the financial crisis.
Ghana’s eurobonds experienced a significant decline on Tuesday following a cautionary statement by Finance Minister Cassiel Ato Forson, who indicated that the nation’s energy debt could potentially double by the year 2027 without immediate action. As a result, the price of 2035 dollar bonds decreased by 1.1% to 73.3 cents on the dollar, marking the lowest level in a month, while 2030 bonds fell by 0.9% to 77.83 cents on the dollar.
At the close of 2024, Ghana’s energy debt reached $4.5 billion, with projections estimating it could rise to $9 billion by 2027. This alarming trend occurs as Ghana continues to recuperate from a 2022 debt default and while navigating the complexities of its recently completed restructuring of a substantial $47.5 billion public debt, compounded by difficulties in its energy sector.
Several factors contribute to the worsening energy debt in Ghana. The state-run Electricity Company of Ghana (ECG) only manages to recover approximately 62% of the energy it procures, resulting in significant financial losses. Additionally, the power generation market remains largely uncompetitive, and electricity tariffs are set below the actual costs of production, placing further strain on the financial health of the sector.
This warning was issued during a national economic dialogue convened in Accra, chaired by President John Mahama, who assumed office in December and has committed to implementing economic reforms. Ghana is also in the midst of negotiations with 60 international banks to restructure $2.7 billion in outstanding loans, amidst a broader initiative to restore fiscal stability.
President Mahama has vowed to implement spending cuts, refine the International Monetary Fund’s $3 billion economic program, and enhance investor confidence in the nation, recognized as the world’s second-largest cocoa producer.
In summary, Ghana faces a dire fiscal challenge as its energy debt threatens to double by 2027 without urgent reforms. The recent decline in eurobonds underscores increasing investor concerns about the country’s economic stability. Essential measures must be taken to revive the energy sector, enhance operational efficiency, and reassure both domestic and international stakeholders of Ghana’s financial integrity.
Original Source: techlabari.com
