Economist, Professor Godfred Bokpin has told Citi Business News the seeming delay in the issuance of the energy bonds may be deliberate to attract more buyers.
He has however urged government to expedite processes to issue the energy sector bonds and improve the financial and energy sectors.
According to Professor Bokpin, the country will suffer more should the bond fail to yield the needed amount hence the need for government to get its timing right.
“The Vice President was talking of towards the end of the month by which time they may have issued the bond…there are issues that have to be resolved and therefore they would have to take their time, otherwise people will not buy into it. So probably we give them the benefit of the doubt as it is not a good thing to do an unsuccessful bond issue,” he explained.
ESLA to serve as collateral for energy bonds
Vice President, Dr. Bawumia at the spring meetings in Washington in April this year, announced plans to issue a 15 year bond to clear the 2.4 billion dollars debts.
The debt according to him is expected to be repaid via the proceeds from the Energy Sector Levy Act (ESLA) which will be used as collateral.
It is unclear how much government intends to raise.
But Dr. Bawumia is confident that the annual amount of 500 million dollars realized from the ESLA should suffice in offsetting the debt upon maturity.
The continuous delay of the unpaid debts has been cited as a critical challenge to the country’s financial sector.
Professor Bokpin also believes the intervention should turn around the financial sector and translate into economic growth.
“But the earlier they do it the better because the reason why the reason why there is some liquidity challenges to some extent in the financial system is also because of the energy sector indebtedness, the banks are exposed to some extent in that area. So the government could restructure that and give them some fresh start then that will be good,” he stated.
Energy bonds not to add onto debt burden
The Governor of the Bank of Ghana, Dr. Ernest Addison has downplayed fears that government’s decision to issue a 15 year bond to clear the energy sector debt will increase Ghana’s debt stock.
With Ghana’s debt stock at 127 billion cedis, some financial observers have advised government not to add on to the debt.
Reacting to a question during the announcement of the Policy Rate, Dr. Addison stated that the method that may be used will not add on to the debt.
“It depends on how it is done if it is issued as a government debt then it will become part of the stock of debt that compute, on the other hand from what I understand, it will be done through the special purpose vehicle and use the ESLA payment to service that debt, so if that is done then it might not necessary be part of the government,” he explained.
Join GhanaStar.com to receive daily email alerts of breaking news in Ghana. GhanaStar.com is your source for all Ghana News. Get the latest Ghana news, breaking news, sports, politics, entertainment and more about Ghana, Africa and beyond.
(Via: CitiFM Online Ghana)