The government is to issue a $530-million bond to raise funds to settle its indebtedness to the bulk oil distribution companies (BDCs), the National Petroleum Authority (NPA) has said.
The debt was incurred as a result of under-recovery from subsidies on petroleum products.
According to the Chief Executive Officer (CEO) of the NPA, Mr Moses Asaga, an accumulated amount from the 10Gp energy infrastructure levy on the petroleum pricing formula would also be used to cater for the payment of foreign exchange (forex) losses owed the BDCs.
Mr Asaga told the Daily Graphic in Accra that the government should be able to see its way clear on the debt repayment by the third quarter of 2016.
He indicated that while petroleum prices were supposed to be determined by an automatic adjustment formula at the pumps, the high cost of crude oil in 2011-2013 prompted the government to subsidise the price of products, leading to the huge indebtedness which came about as a result of under-recoveries.
The amount to be realised from the issuance of the bond, Mr Asaga said, would clear all legacy debt obligations to the BDCs.
The government, he said, had taken the foreign exchange losses very seriously, to the extent that the losses had been discussed at the Economic Management Team level.
“We have been looking at various instruments that can be raised to cater for the debt and at a recent meeting of the Bank of Ghana (BoG), a decision was arrived at that the amount left to be paid would be re-fenced and some bond issued for it, so that the amount could be paid against the bond," he said.
He said with the BDCs demanding an interest payment on the debt, the phase two audit validation being carried out by the international audit firm, Ernst & Young, and expected to be completed by July 2016, would also determine the real value factor (RVF) of the interest being demanded.
RVF & Interest
Mr Asaga explained that the BDCs had argued that the money held by the government could have raised them enough trading profits if the debt had been paid on time.
The government, he said, had, however, contested the contention of the BDCs and had, therefore, tasked Ernst & Young to validate the claims.
The government, he said, was of the view that when BDCs raised letters of credit (LCs) from the commercial banks, "the banks turn around to say they do not have the dollar equivalent”.
The banks, he said, held such money until the time they were able to raise the dollar equivalent before establishing the LCs.
The Ministry of Finance, he said, had, therefore, maintained that while the banks held the cedis, they used it to do their business, hence they should be able to pay the interest percentage charge to the BDCs.
"Since they could not raise the dollars on time for the BDCs, portions of the interest claims being made should be directed at the commercial banks," Mr Asaga suggested.
He said the assertion that the huge non-performing loans owed the banks by the petroleum sector resulted from the government’s inability to clear the foreign exchange losses was not a true reflection of the situation on the ground.
The government, he said, had recognised that the oil marketing companies (OMCs) were also owing the BDCs to the tune of GHc1.5 billion, "so the attribution that it is just the government that owes the BDCs is not the complete story”.
He said although the government had already paid some $380 million of the debt, which went to improve the liquidity of the banks, "the banks are still apprehensive, since there is still more to be paid".
Source: Daily Graphic
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