Energy expert, Kwadwo Poku, has backed a call for the government to cancel some Power Purchase Agreements (PPAs) to curtail ballooning debts.

The Africa Centre for Energy Policy (ACEP) on Wednesday urged the government to rationalise the power sector by cutting out some of the excess power generated by the Independent Power Producers (IPP).

According to ACEP, this can only be achieved when government boldly cancels some contracts and pay the relevant penalties that may be incurred.

Speaking on PM Express on Thursday, Kwadwo Poku, said although the move may raise the energy sector debts temporarily, it will in the long term free the country from the seemingly insurmountable debt situation.

“In the long term, there are some companies that we are going to end up paying them $1 billion. But now if you let them go, you are going to pay penalty and that penalty you can pay now when the present value of that cost in the long term is better. Because basically, they go off your books and you don’t have to accumulate that in the long term.

“But the Ghana situation that we find ourselves in is that at the present time, we don’t have money, we owe this IPPs that we can’t even afford money to pay their bills,” he said.

Photo(above): Kwadwo Poku is an Energy Expert

The catch to the suggestion, however, was that the government must be in a position to find the money to clear the debt to particular IPP and pay the relevant penalties that may accrue.

Last year, the government undertook a rationalisation of the sector, terminating some power purchase agreements and reportedly saving the State some $7 billion.

Related: Politics of power: Gov't saved $7b over PPAs contract termination?

Meanwhile, the International Monetary Fund (IMF) Country Director for Ghana, Dr Albert Touna Mama, has warned the government that the economy could be plunged into crises soon if current debt challenges within the energy sector are not addressed.

According to the IMF boss, the government can do away with many of the IPP’s in the sector due to the financial challenges facing the economy.

Dr Albert Touna Mama made the comment at a stakeholders round table workshop on the topic: ‘Tackling Ghana's Political Budget Cycle: Lessons for Ghana beyond the IMF.’

Watch the full episode of the Business Edition of PM Express on Thursday. The discussion focused on the energy sector challenges.