The International Monetary Fund (IMF) has said that the country’s energy sector debt will continue to remain above US$1billion per year if government does not step up its game in implementing the Energy Sector Recovery Plan.

According to the Article IV report (2021) of the IMF, as at the end of 2018 (the latest publicly available data) the sector’s losses had translated into cumulative arrears of US$2.75billion – of which US$851million is owed to the private sector.

Last year, the report adds, the country spent 2 percent of GDP to support the sector which is beset with challenges such as excess power generation capacity and gas supply, limited transmission capacity, large distribution losses, and low and subsidised electricity tariffs.

According to the Fund, government in recent years has signed Power Purchase Agreements (PPAs) with 32 Independent Power Producers (IPPs) – resulting in excessive supply over demand and high fixed cost. Even though government is renegotiating some of these contracts, a move that can reduce cost by 30 percent (saving US$220million in 2022), the IMF says it will involve refinancing IPP debt worth US$900million.

Then, the challenge of power sector shortfalls keeps choking the energy sector; as electricity tariffs only cover 73 percent of cost. Thus, the IMF says adjusting electricity tariffs to inflation will be needed to bring the annual financial shortfall from electricity generation under US$500million by 2024.

Source: www.kingdomfmonline.com