Ghana’s eurobonds fell significantly after Finance Minister Cassiel Ato Forson warned that the country’s energy debt could double to $9 billion by 2027 without urgent measures. Currently standing at $4.5 billion, the energy debt is exacerbated by high losses, lack of competition, and underpriced tariffs. As negotiations continue with international banks for loan restructuring, President Mahama’s administration is focusing on economic reforms to enhance financial stability.
Ghana’s eurobonds experienced a significant decline on Tuesday following a warning from Finance Minister Cassiel Ato Forson regarding the potential doubling of the nation’s energy debt by the year 2027 unless immediate action is taken. Specifically, the 2035 dollar bonds dropped by 1.1%, landing at 73.3 cents on the dollar, marking the lowest level in a month, while 2030 bonds fell by 0.9% to 77.83 cents on the dollar.
As of the end of 2024, Ghana’s energy debt stood at $4.5 billion; however, projections suggest it could escalate to $9 billion by 2027. This financial forecast poses a significant challenge for Ghana, which is still in the process of recovering from its debt default in 2022. The country has recently undertaken a thorough restructuring of its $47.5 billion public debt but is contending with increasing financial pressures from its struggling energy sector.
Several factors are contributing to the rising energy debt in Ghana. Notably, the state-run Electricity Company of Ghana (ECG) reported that it only accounts for 62% of the energy it procures, leading to substantial losses. Additionally, the power generation market remains largely monopolized, and electricity tariffs are set below the actual production costs.
This dire warning was presented during a national economic dialogue held in Accra, presided over by President John Mahama, who assumed office in December with commitments towards economic reform. Ghana is also engaged in negotiations with 60 international banks to restructure $2.7 billion in outstanding loans. President Mahama has vowed to minimize spending, refine the IMF’s $3 billion program, and work to fortify investor confidence in Ghana, recognized as the world’s second-largest cocoa producer.
In summary, Ghana faces an escalating energy debt crisis, projected to reach $9 billion by 2027 unless urgent measures are implemented. The decline of eurobonds, coupled with the state of the energy sector, underscores the necessity for strategic interventions to prevent financial destabilization. President Mahama’s administration aims to reform the economy and restore confidence among international investors, which will be crucial for the country’s recovery.
Original Source: techlabari.com
