The Chairman of the United States House Foreign Affairs Committee, Brian Mast, has called for a portion of Ghana’s next International Monetary Fund (IMF) disbursement to be directly allocated to settling outstanding debts owed to Independent Power Producers (IPPs), including facilities partly owned by U.S. pension funds and taxpayers.

In a letter addressed to U.S. Treasury Secretary Scott Bessent, Chairman Mast expressed concern over what he described as Ghana’s continued failure to honour financial commitments under its ongoing IMF-supported programme.

“I now recommend that the United States Executive Director to the IMF, once appointed and confirmed, formally request that a specific portion of the next IMF disbursement to Ghana be explicitly directed towards settling outstanding payments owed to the IPPs,” he stated.

The recommendation follows growing disquiet over Ghana’s ballooning arrears to Independent Power Producers, including power generation facilities owned by US pension funds and US taxpayers, a situation many fear threatens the stability of the power sector and investor confidence.

According to Chairman Mast, although recent payments made by the Electricity Company of Ghana (ECG) to American-affiliated IPPs — Twin City Energy and Early Power Ltd. — marked some progress, they fell short of expectations. Each company reportedly received about $5.5 million, below the anticipated $7.5 million. These payments, made in Ghana Cedis, were nonetheless seen as a slight improvement from previous disbursement patterns.

The letter also referenced a recent economic briefing by former President John Mahama’s advisory team, which outlined key priorities for economic recovery.

These include rebuilding reserves, ring-fencing certain funds, and refinancing government obligations. However, Mast expressed scepticism about the government’s actual commitment to tackling the IPP debt burden.

“President Mahama does not appear to be listening to his advisors as proposed solutions – like ring-fencing – remain mere talking points,” Mast stated, adding that the government’s push to rebuild reserves might conflict with the urgent need to clear power sector arrears.

He further warned that continued failure to prioritise these obligations could discourage American investors and deepen the operational crisis faced by IPPs.

“I believe such a measure is essential to keeping American investors interested in Ghana, addressing the ongoing financial strain on IPPs and ensuring the stability of Ghana’s power sector,” he stressed.

The IMF’s next programme review mission to Ghana is expected in April, ahead of potential Board action in June. Chairman Mast’s intervention echoes calls made during the 118th U.S. Congress to condition previous IMF support on the resolution of IPP arrears.

Read the full letter below:

Dear Secretary Bessent,

This letter provides an update on concerning recent developments regarding payments owed to Independent Power Producers (IPPs) in Ghana and the Government of Ghana’s failure to uphold its commitments to IPPs under the terms of its most recent International Monetary Fund (IMF) program. Among these IPPs are two power generation facilities owned by U.S. pension funds and the U.S. taxpayer.

An American investor recently noted that the Electricity Company of Ghana (ECG) processed two payments each to Twin City (TCE) and Early Power Ltd. (EPL) in Ghana Cedis. While these payments, estimated at approximately $5.5 million each, are a significant improvement compared to previous periods they remain below the anticipated $7.5 million due to each entity.

On Wednesday January 29th, President John Mahama’s advisory team outlined his current administration’s economic priorities to investors. These include rebuilding the nation’s creditworthiness, building up reserves, potentially ring-fencing certain funds, and refinancing facilities to improve the government’s repayment profile. They expressed a strong focus on the power sector and highlighted efforts to rebuild the cash waterfall mechanism, taking credit for its original design. While they mentioned actively working to smooth out repayments and possibly moving certain debts to external facilities for greater confidence, they did not specifically commit to applying this approach to the power sector debt.

President Mahama does not appear to be listening to his advisors as proposed solutions – like ring-fencing – remain mere talking points. Additionally, the acknowledged scarcity of government funds suggests that the focus on rebuilding reserves might impede the simultaneous clearing of existing arrears owed to IPPs.

The IMF program, which was designed to stabilize Ghana’s economy and restore fiscal discipline, included explicit commitments to honoring financial obligations to these providers. I understand that the next IMF field report will be completed in April, following an expected in-country mission during the coming days and in preparation for potential IMF Board action in June.

Given this context and recalling House Foreign Affairs GOP engagement from the 118th Congress, which advocated for conditioning the December 2023 IMF tranche on the resolution of IPP arrears, I now recommend that the United States Executive Director to the IMF, once appointed and confirmed, formally request that a specific portion of the next IMF disbursement to Ghana be explicitly directed towards settling outstanding payments owed to the IPPs.

I believe such a measure is essential to keeping American investors interested in Ghana, addressing the ongoing financial strain on IPPs and ensuring the stability of Ghana’s power sector.

Source: Graphic online