Ghana’s Finance Minister has warned that the nation’s energy debt, currently $4.5 billion, could double to $9 billion by 2027. The announcement caused a notable drop in eurobond prices. The situation is critical as Ghana navigates financial recovery from a 2022 debt default and seeks to restructure $2.7 billion in international loans.
Ghana’s eurobonds experienced a steep decline on Tuesday after Finance Minister Cassiel Ato Forson issued a stark warning regarding the nation’s energy debt, projecting that it may double to $9 billion by 2027 unless immediate action is taken. The country’s energy debt was reported at $4.5 billion at the end of 2024. In the bond market, 2035 dollar bonds fell 1.1% to 73.3 cents on the dollar, marking the lowest value in a month, while 2030 bonds saw a 0.9% decrease to 77.83 cents.
The significance of this situation is underscored by Ghana’s ongoing recovery from a debt default in 2022, which included a substantial $47.5 billion public debt restructuring. The energy sector continues to exert financial pressure on the country, contributing to a precarious economic environment that demands urgent reforms.
Several factors have been identified as drivers of the burgeoning energy debt, including high operational losses whereby the Electricity Company of Ghana (ECG) reportedly only accounts for 62% of the energy it purchases, a lack of competition in the power generation sector, and electricity tariffs that remain set below production costs.
This warning from Minister Forson emerged during a national economic dialogue held in Accra, presided over by President John Mahama, who assumed office in December with a mandate focused on economic reform. Currently, Ghana is in negotiations with 60 international banks to restructure approximately $2.7 billion in loans. Mahama has committed to reducing spendings, enhancing the International Monetary Fund’s $3 billion program, and re-establishing investor confidence in the second-largest cocoa-producing nation.
In summary, Ghana faces a significant challenge with its rising energy debt, which is projected to double within four years without intervention. The broader implications of this debt crisis, particularly in the context of the country’s recent financial struggles, underscore the necessity for substantial economic reforms and improved energy sector management. The government’s initiatives to negotiate loan restructuring and restore investor confidence are critical steps toward stabilizing the economy.
Original Source: techlabari.com
