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15 year energy bond timely for banks’ rising NPLs – CAL Bank MD

Banks are optimistic of significant improvement in their non-performing loan portfolios as government initiates moves to clear all outstanding debts owed them.

The assurance comes on the back of government’s plan to raise bonds to clear the debts owed in the energy sector.

The Vice President, Dr. Bawumia at a meeting in Washington last week announced that the government will issue a 15 year bond to settle the 2.4 billion dollars debt in the energy sector.

The debt has been cited as a threat to the banking sector as it has led to about 36 percent increase in the bad loans of banks as at February 2017.

The Managing Director of CAL Bank, Frank Adu Junior speaking to Citi Business News lauded the move and explained that it should help correct the bad loans of affected banks.

“If the bonds are issued, what it means is that we are paid out completely. The bond is issued to raise cash to pay the debts so whoever is owed is paid and the ESLA is now used to amortise the bond for the next fifteen years,” he said.

Figures available to Citi Business News show that the total debt owed by VRA amounted to 782 million dollars as at December 2016 while the total debts owed fuel companies accounted for 440 million dollars of the total energy sector debts.

Maintain ESLA after settling debts

Meanwhile Mr. Frank Adu has made a case for the Energy Sector Levy Act to be maintained even after the payment of the amortised 15 year bond.

In his view, the levy, which accrues an annual estimated amount of 500 million dollars should among other things help raise revenue to meet other critical expenditure by the government

“Even if governments are disciplined enough going forward, what stops them from keeping ESLA in place and using them for developmental purposes,” he stressed.

Source: http://citibusinessnews.com/index.php/2017/04/27/15-year-energy-bond-timely-for-banks-rising-npls-cal-bank-md/

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