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No need for energy levy cuts due to US$ 2.4bn debt- IECP

energy-2Despite assurances from President Akufo Addo to grant some tax cuts in the power sector, the Institute of Energy and Climate Change Policy (IECP) has cautioned that any attempt to review the energy sector levy downwards may cause a power crisis due to the huge debts crippling the sector.

President Akufo-Addo during his maiden State of the Nation Address disclosed that his government has inherited an energy sector debt of 2.4 billion US dollars.

He also outlined plans to clear the debts by restructuring it and possibly list the Volta River Authority on the Ghana Stock Exchange.

But speaking to Citi Business News on the issue, the Director of Research and Policy at the IECP, Dr. Philip Adom stated that the level of the debts should reiterate the need for no cuts in electricity tariffs.

“The President mentioned that they will cut some tariffs so that it will bring some relief to consumers, now if you juxtapose that with the debt, then one will say dumsor will be a possibility. The coming in of dumsor will be a high possibility… At the moment we know that this energy sector is financially crippled and that they need money to run the industry and also to keep our commercial banks running,” he argued.

Mr. Adom who is also a lecturer at the University of Professional Studies, Accra,  (UPSA) stated that the energy sector levy is currently the main revenue generation avenue to help clear the debt hence any attempt to reduce it will negatively affect the banks.

“One of their main sources of revenues is the tariff that we pay, so if government is going to reduce tariffs as was promised in his [Nana Akufo Addo] speech, what is going to happen is that we are going to have a revenue shortfall and that means that it is going to affect the financial status of our utility providers and that in the end can affect their operations and we could plunge into this problem of power crisis,” he warned.

Mr. Adom was of the view that Ghanaians will understand the situation if the tariff is maintained for a while to give some financial space to the government.

“There is still fear so we don’t expect Ghanaians to be so happy for now if government should come and announce that there is going to be a reduction in electricity tariff,” he said.

The IECP in the past also backed the Finance Minister, Mr. ken Ofori Atta when it was reported that the energy sector levy may not be reduced.

Source: http://citibusinessnews.com/index.php/2017/02/22/no-need-for-energy-levy-cuts-due-to-us-2-4bn-debt-iecp/

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