World Bank’s Country Director to Ghana, Pierre Frank Laporte, the World Bank (WB) , has revealed that Ghana’s energy sector debt is a major contributor to the country’s debt woes.
In a recent interview, he stated that the World Bank had identified specific elements causing the country’s debt crises.
He explained that the sector’s weaknesses are characterised by tariff systems and management challenges, as well as the state’s expensive power purchases and transmission losses.
These, he maintained, were the major challenges in the energy sector that were fueling Ghana’s debts.
According to him, the disparity between the production costs of Independent Power Producers (IPPs) and the amount customers paid increased indebtedness because the government could not make financial promises to them (IPPs).
He claimed that the Power Purchase Agreements (PPAs) inked by the government were costly. In addition to costly power purchases, the country was paying for energy it did not utilise as a result of “take or pay contracts.”
“In the case of Ghana, those contracts that have been signed as PPAs are just expensive and the kind of PPAs signed are take or pay. You pay although you do not use it. The fact is that in the past few years, Ghana entered into an agreement at the wrong rate and the wrong price, and it has impacted the debt situation.”
To minimise a substantial percentage of the debts, he encouraged the government to pursue various reforms in the areas of tariff modifications, resolving transmission losses through improved infrastructure, and restructuring power purchasing agreements in accordance with the country’s energy demands.
He said that much might be accomplished if the targeted energy sector reforms were followed, citing the recent increase and accompanying tariff approval by the Public Utility Regulatory Commission (PURC).
He recommended the government use the West African Power Poll to supply inexpensive power to its citizens and industry.