Parliament has approved a US$20 million financing agreement between Ghana and the International Development Association (IDA) to finance the proposed Energy Sector Transformation Initiative Project.
The Chairman for the Parliamentary Select Committee on Finance and Member of Parliament for New Juaben South, Dr. Mark Assibey-Yeboah, informed the House that the financing is necessary to support the government’s efforts to improve the financial sector regulatory framework.
Presenting the Finance Committee’s report in Parliament, Dr. Assibey-Yeboah stated that the IDA concessionary facility has favourable terms and conditions, and that the agreement will help in achieving the objective of the project.
Dr. Assibey-Yeboah reiterated that the objective of the loan facility aims at supporting the government’s vision of making a broad range of affordable, high quality and formal financial services and products available to Ghanaians.
Stating the Minority’s position on the loan facility, Member of Parliament for Sekyere Afram Plain and member of the Parliamentary Select Committee on Finance, Mr. Alex Adomako-Mensah, pointed out that the IDA facilities that come for Parliamentary approval are targeted at technical assistance and capacity building, other than sector development.
Mr. Adomako-Mensah averred that funding from IDA should rather be targeted at projects that support growth while budgetary funding should be used for capacity-building related activities.
He added that the Ministry of Finance must streamline the loan facilities to reflect projects targeted at growth in the country.
Resolution on the motion
The Deputy Energy Minister and Member of Parliament for Afigya Kwabre South, Mr. Owuraku William, moved in favour of the motion and was seconded by the Majority Leader and Member of Parliament for Suame, Mr. Osei Kyei-Mensah-Bonsu.
The Resolution was passed, and approval was granted by the House pursuant to Article 181 of the 1992 Constitution, Order 148 of the Standing Orders and Sections 55 and 56 of the Public Financial Management Act, 2016 (Act 921).
Terms and Conditions of the loan facility
The loan facility by the International Development Association has 5 years of grace period and 25 years of repayment period. The loan also has a maximum commitment charge of 0.5 percent per annum, a service charge of 0.75 percent per annum and an interest rate of 1.25 percent per annum.
On the grant element of the loan, 33.23 percent is covered.
The project consists of five main components:
The first component covers the Management of Energy Sector Financial Flows with an amount of US$6.3 million.
The activities under this component will assist in addressing the financial viability of the energy sector by improving revenue management at the sectorial level, revenue collection at the utilities level, organisational structures, and strengthening the power companies’ operational and financial management functions.
The second component aims at Sector Planning and Coordination with an amount of US$3.5 million.
The component will assist the government to design effective institutional arrangements with clear mandates for the regulatory institutions.
The third component with an amount of US$3 million, aims at energy access through electrification, strategy for increase access to safe, clean cooking and upgrade of the Northern Energy Development Company (NEDCo).
The fourth component further focuses on supporting the natural gas sector by providing strategy for balancing gas demand and supply, review of the West African Gas Pipeline (WAGP) treaties, and support for capacity building and vocational training.
The amount of money allocated for this component is US$3.2 million
The fifth component deals with project management and is assigned US$2 million.
It aims at supporting the administrative cost of the project including monitoring and evaluation.
There is allotted an amount of US$2 million for contingencies, exchange rate losses or any other related activities.