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Ghana government ready to offset energy sector debts

President Dankwa Akufo-Addo has disclosed that government would soon issue a 2.5 billion dollar bond to offset the legacy debts of the energy sector in order to create space for increased investment.

The President said the decision was borne out of the need to address quickly Ghana’s energy supply constraints by tackling the financial challenges of the sector.

President Akufo-Addo said this on Wednesday when he addressed the opening of the 2017 World Bank Development Finance Forum in Accra.

The two-day event, aimed at unlocking private investment in African markets, is the first to be hosted outside Europe.

President Akufo-Addo said in the bid to revitalise the energy sector, government had encouraged majority Ghanaian private sector participation in the Electricity Company of Ghana (ECG), the main distributor of power in Ghana, under the Millennium Challenge Compact with the United States Government.

He informed the Forum that government had reviewed existing Power Purchase Agreements (PPAs) aimed at moving Ghana from the reliance on thermal towards renewable energy, saying; “We have, thus, decided that new PPAs will only be signed for renewable energy.”

President Akufo-Addo stated that the programmes and policies that had been initiated by his government, five months into office, would put the country on a path of fiscal consolidation, debt sustainability and growth.

He said in order to attract private sector investment into Ghana it was instructive to maintain a stable macroeconomic environment in the context of a growing economy.

It was for this reason, he said, that his administration had established a macroeconomic framework with policies that sought to restore fiscal discipline and macroeconomic stability.

“We have put in place measures to reduce the fiscal deficit bequeathed to us from nine per cent in 2016 to 6.5 per cent this year. Government has created fiscal space by capping earmarked funds to 25 per cent of government revenue, and realigning expenditures to government priorities. This is a policy that successive governments have tried over several years to implement, but were unable to do,” he said.

The President said his government has re-oriented fiscal policy from a focus on taxation to a focus on production to boost growth.

Furthermore, effective September 1 this year, clearance of goods from Ghana’s ports would be 100 per cent paperless and all internal customs barriers would be removed to facilitate the movement of goods.

As part of the process of formalising the economy, President Akufo-Addo reiterated the commitment of government towards implementing a digital property addressing system and issuing of biometric National Identification cards to residents this year so that every resident would have a unique identification number.

On agriculture, the President said: “We have instituted a programme that we have dubbed; Planting for food and Jobs,” to give farmers access to affordable inputs, extension services and improved irrigation infrastructure.

“We are embarking on a private sector led industrialisation programme through a ‘One District, One Factory Initiative,’ and a 100 million dollar stimulus package for the revival of distressed companies,” he said.

The President informed the Forum that government, as a matter of policy, had decided to seek more private sector equity financing for infrastructure projects which was underpinned by his commitment to the private sector and by the desire to maintain debt sustainability.

“We are implementing a policy of re-profiling our existing debts to extend the maturities, reduce the interest burden and create space for the private sector. About six weeks ago, Ghana issued, for the first time, a 15-year local-currency bond, raising in that cycle more than US$2 billion. That is evidence of the returning private investor confidence in Ghana.

“Because investors make decisions on the basis of their perception of risk and uncertainty, this transaction sends a clear message to the markets that this new government, my government, has started on a sound footing and that Ghana is on a path of fiscal consolidation, debt sustainability and growth,” he said.