The Vice President of Ghana and Head of Economic Management Team, Dr Mahamudu Bauwmia has said that analysts who say that Covid spending alone cannot be the reason for the increase in Ghana’s public debts are right.
He said the banking sector cleanup exercise, as well as the excess energy capacity payment by the government, are also contributing factors to the rising debt.
Dr Bawumia said these while justifying the decision by the government to go to the International Monetary Fund (IMF) for support.
He explained while speaking at the launch of the Accra Business School IT programme in Accra on Thursday, July 14 that an amount of ¢17billion was spent in paying for the excess energy that Ghana did not need but had to pay for due to the agreement signed by the National Democratic Congress (NDC) administration.
“Some commentators and analysts have argued that the Covid 19 expenditure by the government alone could not be the reason for the increase in the fiscal deficits and the debt stock. In fact, they are right, Covid 19 expenditures alone were not the reasons for the large increase in Ghana’s debt stock by the end of 2021.
“In fact, as I stated in my April 7 lecture, this year, in addition to Covid-19, there are two major items of expenditure that are critical in understanding the evolution of the fiscal deficits and the debt stock. These two items are the banking sector cleanup and the Energy Sector excess capacity payment.
“The excess capacity payment of 17bn cedis relates to the legacy of take-or-pay contract that saddled our economy with annual excess capacity charges of closed to 1bilion US dollars a year. These were basically contracted to supply energy to Ghana in excess of our requirements at the time. We were obligated to pay for the power whether we used it or not.
“The excess capacity payment of this 17billion includes the 7 billion cedi payment for gas resulting from signing of an off-take agreement for a fixed quantity of gas with ENI, Sankofa on take-or-pay basis which was way in excess of what we needed at the time.”
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