The Energy Minister-designate for Energy, Boakye Agyarko, says government will reduce the energy sector levies in spite of the huge debts of players in the sector.
He said the energy sector levies would be reviewed downwards because the government cannot rely on the present tax fiscal space to deal with the challenges confronting the energy sector.
A 17.5% Special Petroleum Tax which is part of the Energy Sector Levies introduced by the previous Mahama administration has been cited as the cause of the constant upward reviews of fuel prices.
The Energy Sector Levies were aimed at clearing the debts of some state-owned enterprises in the energy sector, the Volta River Authority (VRA) and the Electricity Company of Ghana (ECG), the two main state enterprises facing the debt challenges.
Mr. Agyarko, who appeared before the Appointments Committee of Parliament on Monday said, “We will revise the energy sector levies for the simple fact that if we rely on the present tax fiscal space to deal with this matter, we will not get very far.”
“If we rely on the local banks who have exceeded their single line obligors in order to rectify the problem we have, we will not get very far,” he said.
Explaining how government will address the challenges in the sector, Mr. Agyarko said, “We will start by reviewing the levies downwards and as we finish the financial engineering of the non-recourse approach then it may be necessary not to have it altogether or use it as part of the dedicated stream of revenues to service the 10 to 15-year tenure.”
Debt Payment Plan
The previous Mahama administration in July 2016 restructured the GHC4.4 billion ($1.4 billion) debt with the major banks that ECG and VRA owed in the country.
As part of the arrangements, the government, together with the Bank of Ghana (BoG), agreed to create an escrow account to transfer GHC250 million to settle part of the debts owed to 12 banks in the country.
In addition, the dollar component was reduced from 11 percent to 8.5 percent, while the cedi component was reduced from 30 to 22 percent.
Government has since made two separate payments to the affected banks.
Payment Plan Inadequate
Mr. Agyarko lauded the plan adopted by the government to clear the debt but said it was woefully inadequate.
He said the current NPP government’s decision to adopt non-recourse financing would improve the situation.
“As I review the single line obligor of local banks I am frightened that the banks mentioned herein are all on their way to receivership and we can’t allow that to happen in an economy.
“The restructuring that is currently being done, in my estimation, is woefully inadequate, it’s a good intention but woefully inadequate.”
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