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Business News of Tuesday, 6 August 2019

Source: citibusinessnews.com

Legacy debt repayment: Banks to access another tranche by end of August

Banks that are exposed to the legacy debts within the energy sector say they are expecting some disbursements by the end of this month to defray part of the outstanding debt.

They are also anticipating a swift clearing of the remaining amount with Parliament’s approval of the increase in the Energy Sector Levy.

The NPP administration inherited an energy sector debt estimated at 2.4 billion dollars or ten billion cedis in 2017.

This follows the government’s decision to ring fence the debt to prevent additional ones from accruing.

The ESLA bond which was issued in 2017 has so far raised 6.665 billion cedis remaining 3.35 billion cedis to be issued.

Initially, the bond was issued in two tranches; seven and ten years which raised 2.26 and 2.74 billion cedis respectively.

Another ten year bond has been issued this year (2019) which raised 1 billion cedis and it is expected to mature in 2029.

Of the amount raised so far, the various institutions comprising power producers as well as banks which provided letters of credit are being paid.

A move the Managing Director of Republic bank, Farid Antar in an interview with Citi Business News described as encouraging as they expect to access another disbursement by the end of this month.

“We do not have too many concerns there right now but definitely any recovery or payment of the debt owed us is definitely welcome. It is yet to be finalized yet but we are hoping to get some payments before the end of August or middle of August what we would like or what we would actually end up getting,” he explained.

The Non-Performing Loans of banks reached 18.1 percent in June this year.

A figure the Governor of the Bank of Ghana, Dr. Ernest Addison believes could be reduced when the exposure to the energy sector debts are addressed.

This is because the core NPLs of banks constitute about 9 percent of the figure.

Meanwhile, Parliament last Friday approved the increase in the Energy Sector levy with an upward adjustment of the price stabilization, road fund as well as the energy recovery levies.