Banks and financial institutions affected by the 2.5 billion dollars Energy sector debt are agitating over the delay in issuing the bond to clear the debt.
Government assured the financial institutions affected that it will raise the funds through lead arrangers, Fidelity Bank and Standard Chartered Bank in September 2017 but the Finance Ministry is yet to explain the reasons behind the delay.
The energy sector debt which arose out of the power crisis experienced in the country from 2012 to 2016 is considered as one of the biggest threat to the stability of the financial sector.
The erstwhile John Mahama administration established the Energy Sector Levy in 2015 to raise money through taxes on petroleum products to pay for the rising debt.
However, the government could not make periodic payments to the banks forcing the Akufo-Addo government to announce plans to issue a bond to clear all the debt.
In August this year during Energy Policy Summit, the CEO of Zenith Bank, Henry Oroh outlined the impact of the debt on banks in the country.
“The energy debt has been a major problem for the industry. It’s been there for four years. It’s quite monumental, 2.5 billion dollars is quite big. As long as those debts are there it becomes a drain on liquidity of banks. Our capacity to support the government and the private sector diminish by the fact that those debts remain unpaid,” he told Citi Business News in August during the Energy Policy Summit.
Meanwhile the Volta River Authority(VRA) which bears a greater part of the debt is also calling for a speedy issue of the bond to save the power generator.
Former Chief Executive Officer and current Board Chairman of the authority, Kweku Awotwi describes the bond as critical.
For the banks, the timely issue of the bond will not only reduce the Non Performing Loan portfolio in the financial sector, but trigger a series of economic activities.
Credit – citibusinessnews.com