Review on-lending agreement with ECG – Dr. Akoto Osei tells Gov’t

Ranking Member of the Finance Committee, Dr. Anthony Akoto Osei, has called on the government to reconsider its on-lending agreement with the Electricity Company of Ghana (ECG).

The Government of Ghana has secured a credit facility of 42.70million Special Drawing Rights (US$60million equivalent) from the International Development Association (IDA), a member of the World Bank Group, with a 1.25% interest rate per annum and a repayment period of 25 years.

This amount of money has been on-lent to the ECG.

Per the terms of the agreement, ECG is to pay a 5.3% interest rate per annum with a repayment period of 17 years.

This is to help boost the operations of the state owned company to deal with their relatively high commercial losses, inadequate revenue collection and limited integration of its systems and functional units.

But, Dr. Anthony Akoto Osei who is also the MP for Old Tafo, commenting on the agreement on the floor of Parliament on Tuesday said the on-lent facility to the ECG needs a critical review considering the financial position of the state owned company.

Mr. Speaker, the interest rate is too high. 5.3% is too commercial and we should not allow this. Somebody must look at the on-lending agreement again. ECG is broke – I mean go and read the World Bank report … 4.6% minimum.

Let us look at the terms you are borrowing … 1.25% interest rate and repaying in 25 years but you are on-lending it to ECG at 5.3% interest rate with repayment period of 17 years. Is government now a commercial bank? The practice has been we give them the same terms. We gave VRA the same terms and so why not do same to ECG? We are taking the decision and we must think about the broader implication. It is bad procedure and we must review the on-lending rate to ECG,” he noted.

A deputy Minister for Finance, Mrs. Helen Mona Quartey also commenting on the on-lending agreement assured the House that ECG despite having some managerial issues has the wherewithal to service the credit facility under the terms of the agreement.

“Mr. Speaker, I must state that ECG is not broke. It may have some management issues. They will be able to service this particular facility and they would be able to pay this interest rate within the grace period and repayment period we have given them. Therefore, there is no real transaction problem relating to the on lending agreement.”

“As at today there is no problem with this transaction as it has been structured because it’s been accepted by all parties and it covers the risk of government taking over the repayment of the ECG facility,” she noted.