Government has brokered a deal with local banks for a flexible payment plan for debts owed by State Owned Enterprises.

The move is geared towards clearing the massive debts owed by SOEs to local banks, which are threatening to cripple the banking sector.In a press briefing in Accra on Tuesday, Mr. Terkper said government is committed to paying the debt.

Mr. Terkper added that the banks have accepted a framework to restructure and repay about GHC2.2 billion of the debt of SOEs over a period of three to five years.

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Key features of the agreement include upfront payment of approximately GHC250 million which will be funded by the new collections from the energy sector levies, reduction of interest rate on the foreign currency component of the VRA debt from an average of 30 percent to 22 percent and reduction of interest rate on the foreign currency component of the VRA debt from average of 11 percent 8.50 percent, Mr Terkper mentioned.

He said the repayments will be funded from a debt service account which will receive cash flows from the energy debt recovery levy, debt service reserve and proportion of VRA’s receivables.

Mr Terkper also said proceeds of the energy debt recovery levy which are applied to VRA debts will be converted into equity on VRA’s balance sheet or could be subject to an on-lending arrangement with government.

He said government will place limits on the ability of VRA to incur new debts without express approval.

The government anticipates that this approach will be used to restructure VRA’s debt and that of other SOEs in the energy sector.