Ghana’s economic recovery faces significant hurdles as the nation grapples with a $2.2 billion dispute over arrears with its electricity suppliers.
Despite recent progress in restructuring its external debt, ongoing conflicts with independent power producers (IPPs) threaten to derail the country’s financial stability and economic growth.
Finance Minister Mohammed Amin Adam recently disclosed that Ghana owes $1 billion to its power producers, with agreements in place to restructure a significant portion of this debt.
However, Elikplim Apetorgbor, CEO of the Independent Power Generators, Ghana, countered this claim, stating that the actual debt, including interest on delayed payments, exchange rate losses, and idle capacity charges, amounts to $2.2 billion.
“We don’t simply count our monthly invoices and deduct what payments have been made,” Apetorgbor emphasized. “Any debt deal must include all associated costs to reflect the true amount owed.”
The government has reportedly reached agreements with five out of seven IPPs. However, deals with Chinese-owned Sunon Asogli Power Ghana Ltd. and a unit of Istanbul-based Karpowership remain unresolved. Apetorgbor highlighted that the debt to Sunon-Asogli alone exceeds $800 million.
Finance Minister Adam, during a press conference on July 1, asserted that Apetorgbor’s figures do not represent the entire industry.
“The CEO may be doing his own thing,” Adam stated. “We have seven IPPs, and we’ve reached agreements with five of them. That is very positive for our country.”
The Finance Ministry declined to comment further on the matter.
The power sector debt has led to intermittent power cuts, hampering economic activities. This has been particularly detrimental as Ghana strives to restructure its debts following a default in 2022, which necessitated a $3 billion bailout from the International Monetary Fund (IMF).
Ghana’s installed electricity capacity stands at 5,639 megawatts, yet the nation struggles to meet its peak demand of 3,618 megawatts.
Persistent power outages threaten to stall economic growth, which, despite quickening to 4.7% in the first quarter of 2024 from 3.8% in the previous quarter, remains below historical trends.
“It’s taking long for economic growth to rebound to its historical trend of around 6%,” remarked Godfred Bokpin, a finance professor at the University of Ghana. “The power cuts are a significant factor holding back our economic potential.”
The debt crisis has also put pressure on the state-owned Electricity Company of Ghana Ltd. (ECG), which has struggled to cover its monthly bills.
Kodzo Yaotse from the Africa Centre for Energy Policy noted, “When power is given to ECG for sale, they’re only able to recover 45%. That’s not healthy because it’s out of this revenue that the entire value chain is paid.”
Ghana’s debt restructuring plan, part of the IMF bailout conditions, requires reducing the debt burden to 55% of gross domestic product from the current 90%.
This necessitates not only restructuring obligations with power producers but also addressing other financial commitments.