The African Center for Energy Policy (ACEP) has told government to be bold to cancel some of the emergency power plant contracts that currently serve no purpose and pay the liabilities
“It is better to cancel and pay than to renegotiate the continuous existence of some of the power contracts”, ACEP recommend in its post analysis of the 2020 Budget.
With a strict focus on oil and energy sectors, the policy think tank said given the critical nature of the power sector challenges, ACEP recognizes that bold decisions are required to salvage the power sector and by extension, the finances of the country.
In that regard, the Government of Ghana should among many other recommendations including outrightly purchase some of the maturing power plants to save payment on recurrent capacity charges as well as ensure that there is transparency and fairness in the bilateral consultation process between Government and each Independent Power Producer (IPP).
A 2017 World Bank publication highlights the financial difficulties of Ghana’s power sector. Since then, government has recognized the need to address these challenges in each year’s budget and public speeches.
In 2019 alone, government lamented the challenges on three important occasions. The Vice President indicated in his presentation at the town hall meeting held in Accra on the 3rd of April, that the country was paying about $25 million every month for excess capacity alone and that could rise to about $40 million by the end of 2019 when other generation systems are expected to mature.
ABFA allocations for 2020
The government intends to spend GH4.33 billion of petroleum revenue in 2020, of which 70 percent is planned to be spent on capital expenditure and 30 percent on goods and services.
This amount is almost equal to the projected Annual Budget Funding Allocation (ABFA) revenue of $761.3 million. ACEP said this is an indication that the unspent balance of GHS 652.29 million of ABFA balance for 2017 and 2018 are not being accounted for in the 2020 budget.
ACEP recommends that government clarify its priorities for the next medium term in line with the law. This will require than an amendment to the budget is presented to Parliament.
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