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Government, IPPs reach debt restructuring deal, says Finance Minister Amin Adam

The deal agreed with the independent power producers will allow the government to spread the payment of arrears owed the IPPs over a period of five years

The Minister for Finance, Mohammed Amin Adam, has announced that the Government of Ghana and independent power producers (IPPs) have reached an agreement to restructure the debt owed IPPs operating in the country.

The deal agreed, the Finance Minister said, will allow the government to spread payment of arrears owed the IPPs over a period of five years.

Amin Adam declared that the agreement will pave the way for the power industry and everyone living in Ghana to enjoy steady power supply going forward.

IPP deal

The Finance Minister made this disclosure in a speech on Monday (24 June 2024) at the UK-Ghana Business Forum in London. The forum was organised by the AM Group in partnership with the Ministry of Finance, Ghana Investment Promotion Centre (GIPC), the Ghana Free Zones Authority (GFZA) and the UK-Ghana Chamber of Commerce (UKGCC) under the theme “Fostering Dialogue and Identifying Opportunities for Collaboration and Growth”.

“Another significant development is on the … IPPs,” the minister announced. “The negotiations have been going on for six years, and I am happy to announce that last week, l closed the negotiations with the IPPs.

“We have closed it, and we have restructured the arrears of the independent power producers in Ghana, particularly the four major independent power producers in Ghana, [in a way] that has brought us some significant haircut or discount and that now allows us to spread the balance over five years or above,” Dr Amin Adam said.

“The problem that Ghana’s energy sector is faced with is now under control. The ECG [Electricity Company of Ghana] managing director is here, and he will confirm that we will stop interruption in power supply in order to provide reliable power for industry to thrive, so we can support the growth efforts of our economy,” the minister said.

New PPP policy

In efforts by the government to increase private sector participation in building infrastructure in Ghana, the Finance Minister said that a decision has been made by the Akufo-Addo government to establish public-private partnership (PPP) units in all ministries, municipalities, districts and government agencies (MMDAs) across the country.

“My ministry has decided to establish public-private partnership (PPP) units in all ministries, departments and agencies of government, so that if we have 100 MDAs, it means that we can have 100 contact points for the purpose of soliciting proposals from the private sector and evaluating those proposals.

“At the moment, there is only one PPP unit within the Ministry of Finance, and you can understand the delays in reviewing PPP proposals. We are changing, such that every ministry, department and agency will have a PPP unit, so you have multiple contact points with the private sector,” the Finance Minister said.

“Once the MDAs have evaluated proposals, the Ministry of Finance would just be interested in whether the proposed project would have a fiscal impact. If it doesn’t have a fiscal impact, we are going to pass it for the PPP project to be implemented.

“This, we think, will fast-track our relationship with the private sector as far as PPPs are concerned so that we can offload a significant portion of our public infrastructure spending to the private sector in order for us to grow the economy faster,” Dr Amin Adam said.

Depreciation of the cedi

On efforts aimed at checking the depreciation of the cedi, the Finance Minister said that strategic and very important steps are being taken to arrest the situation, and these have started yielding results.

He also announced that the government has begun discussions with the International Monetary Fund with the aim of correcting what he says is a defect in the current IMF programme that limits the Bank of Ghana (BoG) to just $80 million a month by way of the money it can release for market interventions to strengthen the cedi.

This limitation, said Dr Amin Adam, is negatively affecting the economy, and is also one of several reasons why the cedi is experiencing rapid depreciation. He said that the government is optimistic about securing the buy-in of the IMF to review the intervention budget limit upwards.

“We have found defects in the design of the Ghana-IMF programme. The IMF programme imposes a limit on what we call the intervention budget. The central banks of every country intervene when your currency is weakening, and so, whilst the central banks have targets in terms of the reserve build-up, there are also limits on how they can intervene.

“So, as I speak to you, the central bank of Ghana, the Bank of Ghana, has exceeded its reserve accumulation target but they cannot put more than US$80 million monthly on the market for intervention.

“The good news is that we are negotiating with the IMF, and so, we will get some weigh-out to all of us to increase our budget intervention so that we can strengthen the cedi,” the Finance Minister said.

Changing the narrative

In a welcome statement, the chief executive officer of GIPC, Yofi Grant, stressed that despite the negative impact of the COVID-19 outbreak on the Ghanaian economy and the worsened effects of the pandemic as a result of Russia’s invasion of Ukraine, the Ghanaian economy has remained resilient, recording growth amidst a global recession.

He added that Ghana is a land of many natural resources that makes her a land of opportunity. Ghana is also a country of openness because of her enviable respect for fundamental human rights and the rule of law, Grant said.

Optimism, he added, is another characteristic of Ghana and Ghanaians, and these three Os (opportunity, openness and optimism) are the driving forces behind the friendly environment that has been created to allow investment to thrive in Ghana.

“There are many from the diaspora who have invested in Ghana, and they are making waves and making changes, and they are the real story of changing the narrative on the African continent,” Grant said.

Reporting by Wilberforce Asare in London

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