Write-off 40% of energy debt – Government to banks

The New Patriotic Party Government is pushing local banks to write-off 40 percent of debt it owes them as part of measures to address the 2.5 billion dollar energy sector debt.

This follows a recent floating of energy bonds to offset the debt which failed to yield the intended targets.

Some experts fear the latest move by government could adversely affect the operations of the banks.

But Deputy Finance Minister Kwaku Kwarteng in an interview on the Morning Starr Thursday told host Francis Abban, that the initiative is mutually beneficial to the financial institutions and the state.

“As far as I am concerned there is nothing wrong with calling your creditor and saying as far back as eight years ago the government came to raise some money for this energy sector and the reason the debt has ballooned to this stage is because of the huge interest, so you the bank make a deal and write some of the interest off or any discussion that the energy sector levies act PLC [the company] can engage in with their creditors so indebtedness will go away for me is good enough.”

According to Hon. Kwarteng, the current arrangement with the banks is a good thing and better for the banks.

“They themselves are aware that this whole project is much better for them because if we didn’t do this, the indebtedness of these energy sectors will still be there [and] the banks will still be suffering.”

Managers of the Energy Sector Levies Act (ESLA) who have been given the mandate by Government to issue the bond, were seeking to raise GHS6billion under the two separate bonds.

But it accrued a total of GHS4.6 billion after it closed the auction last Friday.

The seven-year bond received the targeted GHS2.4 billion while the 10-year bond accrued about GHS2.2 billion, below the target of GHS3.6 billion.

The managers also accepted an interest rate of 19.5% for the 10-year bond.