Ghana, IPPs agree on $1.7bn debt payments

The Independent Power Producers in Ghana recently suspended a potential shutdown after reaching an interim deal with the state-run Electricity Company of Ghana regarding a $1.7 billion debt owed to them. The situation had been tense over the weekend, with the initial request being for at least 30% of the outstanding debt to be paid by Friday. However, the Electricity Company of Ghana reported that no payment was made. Despite this, an agreement was reached, resulting in the suspension of the threatened shutdown. John Gatsi, the Dean of the University of Cape Coast School of Business, shed light on the recent developments during an interview. He mentioned that the Managing Director of the Electricity Company of Ghana stated that a meeting had taken place with the Independent Power Producers, leading to better mutual understanding between the parties. This newfound understanding contributed to the decision to halt the planned shutdown. Although the MD did not provide details on the payment structure, the agreement reached marked a significant step in the ongoing discussions. In addition to the discussions with IPPs, there have been talks between the government and banks regarding the restructuring of about $1.36 billion in U.S. bonds and cocoa bills. The goal is to consolidate on deal agreements to unlock the remaining tranche, considering that only $604 million had been released earlier. The upcoming IMF visit to Ghana and the progress made under the program will influence the decision-making process moving forward. Gatsi highlighted the importance of addressing the debts issued in foreign currency, particularly the dollar-denominated bonds. While there have been positive developments in negotiations with banks holding these debts, there are still some challenges to overcome, including differences in interest rates. Furthermore, the issue of pension funds remains unresolved and could potentially impact the debt restructuring efforts. Ghana has set ambitious targets to reduce its interest payments and overall debts by approximately $10.5 billion over the next three years. As the country continues to navigate its debt obligations, ongoing discussions and agreements with IPPs and banks will play a crucial role in shaping its financial landscape.