Govt nears deal with IPPs over arrears
By Daniel NONOR, Accra
In a significant move to address the nation’s debt owed to Independent Power Producers (IPPs), Minister of Finance Dr. Mohammed Amin Adam has announced that the government is on the verge of finalizing a debt restructuring agreement.
This development comes as part of efforts to alleviate the financial burden and enhance economic stability in the country.
Addressing the press on the economy’s performance in Accra yesterday, Dr Adam revealed that within the next two to three weeks, the government would sign off on the agreement with IPPs.
The arrangement aims to spread the payment of the substantial arrears, currently looming large on the government’s books, over a five-year period.
Sources close to the negotiations disclosed that the government has managed to reduce the debt owed to IPPs to approximately $700 million, marking a significant milestone in the ongoing discussions.
Moreover, in a gesture of goodwill, the government has already initiated payments agreed upon during the negotiation process.
Dr. Adam highlighted that the effective implementation of the remodeled Cash Waterfall Mechanism would ensure timely payments to IPPs and state-owned enterprises, while also preventing the accumulation of arrears in the future.
Updating on the performance of the Ghanaian economy, Dr Adam noted a considerable improvement in the stability of the national currency, the Cedi, against major trading currencies since 2023.
He pointed out that the depreciation of the Cedi against the US Dollar reduced to 9.1% from February to December 2023, compared to a 29.8% depreciation during the same period in 2022.
Continuing into 2024, the Cedi’s stability persisted, with a cumulative depreciation of 6.8% as of March 20th, 2024, compared to 22.1% in the same period of the previous year. Despite recent pressures on the exchange rate due to various factors including the strengthening of the US Dollar and delays in disbursements, the Bank of Ghana has implemented measures to mitigate these challenges.
Regarding Ghana’s program with the International Monetary Fund (IMF), Dr Adam highlighted significant progress made towards meeting the targets outlined in the 3-year, $3 billion IMF Supported Post Covid-19 Programme for Economic Growth (PC-PEG).
The upcoming 2nd Review Mission scheduled for April 2024 is expected to further evaluate Ghana’s adherence to the program’s targets.
Furthermore, the Minister emphasized the progress made under the structural measures of the IMF-supported program, particularly in operationalizing the Ghana Financial Stability Fund (GFSF) project.
This initiative aims to safeguard the financial sector from the impact of government debt operations.
Dr Adam reiterated the government’s commitment to restoring Ghana’s long-term debt sustainability, highlighting ongoing discussions with bondholder representatives following agreements with Official Creditors under the G20 Common Framework.
These efforts are crucial steps towards ensuring Ghana’s economic stability and meeting targets set under the IMF/World Bank Debt Sustainability Framework.
