Fitch Ratings, says its expects Ghana’s public debt to ‘plateau’ at 75 per cent of Gross Domestic Product (GDP) starting 2024.
Implying that, there will be no further or significant change in the country’s public debt from 2024 onwards.
This, the international credit ratings said, will be after a continuous rise in public debt in 2021 and 2022 occasioned by high Covid-19 pandemic-related spending and energy sector liabilities.
Fitch made the assertion assessing Ghana’s energy sector debts and the risks it poses to the nation’s overall public debt trajectory for the years ahead.
According to Fitch, Ghana’s energy sector faces both a stock of debt outstanding and ongoing losses that result from an inefficient operational environment and uneconomical tariff structure.
But Fitch also noted that it expects the Energy Sector Recovery Programme (ESRP) being implemented by the nation’s Finance Ministry and aimed at clearing some $1 billion in debt to independent power producers and renegotiating ‘Take or Pay’ deals made with power-generation companies to save government some $5 billion.
Adding that, failure of government to renegotiate such deals made will add liabilities of as much as $12 billion to already existing energy sector debt.
“In December 2020, the Ministry of Finance announced that its progress on the Energy Sector Recovery Programme (ESRP) included the clearing of USD1 billion in debt to independent power producers and deals made with power-generation companies that could save up to USD5 billion. We believe that the government’s actions will avert the worst-case scenario, but that additional liabilities of as much as USD12 billion could fall on the government if such efforts fail,” stated Fitch.
Fitch says it estimates current unmatched energy sector liabilities to be between 4 per cent ($2.8 billion) and 5 per cent ($3.5 billion) of GDP.
“We expect that efforts to clear existing energy sector arrears will add a little over 1 per cent of GDP to Ghana’s government cash deficit each year through 2023. The amount of energy sector debt to materialise on the government’s balance sheet beyond 2023 will depend on the success of government efforts to reform the sector,” Fitch added.