Going to IMF due to internal crisis left by Mahama & the Covid-19, Russian-Ukraine war- Veep
Vice President Dr. Mahamudu Bawumia has justified the reason(s) why the Nana Addo-led administration has headed to the International Monetary Fund (IMF) for a bailout.
This follows his earlier engagements with officials of the Fund on Tuesday, July 12 as part of IMF’s data gathering visit.
He explained that the Covid-19 pandemic and the Russian-Ukraine war are not the only issues that affected the economy but the banking sector clean-up and energy excess capacity payments.
He was speaking as the Guest of Honour at the official launch of an event organised by the Accra Business School and South East Technological University in Ireland.
He categorised the challenges into internal by identifying the banking crisis and energy excess capacity payments as challenges left by the previous NDC government and the external crisis i.e the Covid-19 outbreak and the Russian-Ukraine war.
According to him, an amount of ¢17billion was spent in paying for the excess energy that Ghana did not need but had to pay for due to the agreement signed by the National Democratic Congress (NDC) administration.
“Some commentators and analysts have argued that the Covid 19 expenditure by the government alone could not be the reason for the increase in the fiscal deficits and the debt stock. In fact, they are right, Covid 19 expenditures alone were not the reasons for the large increase in Ghana’s debt stock by the end of 2021.
“In fact, as I stated in my April 7 lecture, this year, in addition to Covid-19, there are two major items of expenditure that are critical in understanding the evolution of the fiscal deficits and the debt stock. These two items are the banking sector cleanup and the Energy Sector excess capacity payment.
“The excess capacity payment of 17bn cedis relates to the legacy of take-or-pay contract that saddled our economy with annual excess capacity charges of closed to 1bilion US dollars a year. These were basically contracted to supply energy to Ghana in excess of our requirements at the time. We were obligated to pay for the power whether we used it or not.
“The excess capacity payment of this 17billion includes the 7 billion cedi payment for gas resulting from signing of an off-take agreement for a fixed quantity of gas with ENI, Sankofa on take-or-pay basis which was way in excess of what we needed at the time.”