Mahama's ‘Wrong and Expensive Take or Pay’ Power Debt Has Woefully Affected Ghana's Economy - World Bank

The World Bank has said the Power Purchasing Agreements (PPAs) signed by former President John Mahama and which the Akufo-Addo government had no choice but to pay has contributed significantly to the economic woes of Ghana.

The former President's administration signed questionable “take or pay” agreements between 2013 and 2016, hence committing Ghana to pay for billions of cedis for excess energy it does not need.

These PPAs which were signed by the erstwhile Mahama government with some independent power producers in the heat of the energy crisis that struck the nation years ago, according to World Bank Country Director, Pierre Frank Laporte, has cost Ghana dearly.

For a government that had failed to raise enough money to pay for the country's power needs, thereby plunging the country into nearly five years of dumsor, the Mahama administration signing such an expensive take or pay deal at the twilight of the regime raised eyebrows in Ghana and on the international.

Although in 2018, the Akufo-Addo administration managed to cancel 11 out of the thirty agreements, the government had to still pay up to fix the mess created by former President Mahama.

Since inheriting the take or pay agreement by the Mahama administration, the Akufo-Addo Government has so far committed over 12 billion cedis to servicing the debt for power Ghana does not need and the agreement is still suffocating the nation.

In the midst of Ghana's return to the IMF for balance of payment support, the World Bank has emphatically faulted the Mahama power purchasing agreements describing it as a major cause of Ghana's economic difficulties.

"In the aspect of Ghana, those contracts you signed with the PPA are too expensive.

"The kind of PPA you signed, it means Ghana is paying for electricity not in use through doubling of capacity.

"The fact is, in the last few years, Ghana entered into some PPAs that were wrong. These types, in our view, were at the wrong rate and at the wrong prices and today you’re paying duly for it. And today the country is being billed for many of these wrong PPAs”, the World Bank Country Director, Pierre Frank Laporte told Joy News in an interview.

The World Bank is therefore calling for an urgent review of what it described as “wrong and expensive” agreements.

“I know that the government has started some talks with the IPPs to renegotiate some of these PPAs,” he stressed.

The Akufo-Addo government has been hailed for its ability to pay for power generation for over six years, thus ending the over four-year dumsor Ghana faced due to the erstwhile Mahama government’s inability to pay for power generation.

Background

The erstwhile Mahama government signed a number of Power Purchasing Agreements (PPAs) before losing power in 2016.

The agreements, numbering over 40, committed Ghana to  over $1 billion dollars of take or pay contracts for excess power.

President Nana Akufo-Addo, in his first State of the Nation Address, announced his government would renegotiate a number of the agreements in order to free the government of the “mountain” debts, an exercise which was carried out with the renegotiation of about 11 of the power deals.

Nonetheless, Ghana was still left with other debt commitments of the remaining agreements which have so far cost the country over 12 billion dollars due to what has been described as reckless signing of agreements in energy sector by former President John Mahama.

Source: Peacefmonline.com/Ghana