Curb judgement debts – analyst urges gov’t

… as fiscal discipline efforts intensify 

By Sandra Agyeiwaa OTOO

An economic analyst has called on the John Dramani Mahama-led administration to prioritise measures to minimise judgment debts, as part of broader efforts to achieve fiscal discipline.

The analyst emphasised the urgent need for tighter controls on contract management and dispute resolution to safeguard public funds and restore confidence in the nation’s financial governance.

Judgment debts—compensatory payments ordered by courts or arbitration panels against the government for contractual breaches or unlawful actions—have remained a significant drain on the public purse. Past cases involving foreign entities have highlighted systemic weaknesses in public financial management, contractual oversight, and dispute resolution mechanisms.

… as fiscal discipline efforts intensify

Speaking in Accra, the analyst, who requested anonymity, noted that the fiscal space cannot afford a repeat of costly judgment debt settlements that undermine the country’s development agenda.

“At a time of constrained public resources, minimising judgment debts must be non-negotiable. These payments divert funds from critical sectors such as education, healthcare, and infrastructure development. The administration must implement reforms to address the root causes,” the analyst stated.

Last year at the Ghana Oil and Gas Conference 2024 in Accra, the U.S. Ambassador to Ghana, Virginia Palmer, urged the government to strengthen its investment climate by reaffirming the sanctity of contracts. Ambassador Palmer highlighted that despite the country’s efforts to improve its regulatory framework, ongoing disputes have raised concerns among investors.

Historical precedents of judgment debts

Ghana has faced high-profile judgment debt cases, especially with foreign entities in other industries. One such example is the arbitration ruling in favor of Societe Generale against the Ghana National Petroleum Corporation (GNPC) over the cancellation of a financial advisory agreement in the early 2000s. The dispute culminated in a multi-million-dollar payment to the French bank, marking one of the most notable cases of financial losses due to a contractual dispute.

Similarly, Ghana was compelled to settle disputes with foreign energy firms following the cancellation of power purchase agreements (PPAs) deemed excessive or unnecessary.

In 2021, a UK tribunal ruled that Ghana had broken a contract and owed British energy firm, Trafigura over US$134 million, plus additional arbitration fees. The debt stemmed from a legal dispute over a power agreement between Trafigura’s subsidiary and the Ghanaian government.

However, Ghana’s legal team missed important deadlines to challenge the decision in UK courts, leading to further legal complications. As a result, last year, a U.S. court upheld the judgment and added more financial penalties.

Similarly, the telecommunications sector has also seen notable disputes. This month, the Commercial Division of the High Court in Accra granted an interim injunction in favor of ATC  Ghana, restraining Airtel Ghana Limited from transferring or disposing of its assets amid ongoing arbitration at the International Chamber of Commerce (ICC) International Court of Arbitration in Paris.

ATC Ghana alleged that Airtel Ghana owes significant overdue payments under their contractual agreements, a claim being contested through arbitration. The Justice chair presiding over the case, emphasised the need to prevent dissipation of Airtel Ghana’s assets, which could render any arbitral award unenforceable.

U.S. Senator highlights debt resolution

United States Senator James E. Risch, the top Republican on the Senate Foreign Relations Committee, has urged Ghana to address US$251 million in outstanding debts to U.S. companies before seeking additional International Monetary Fund (IMF) support.

In a post on X, the senator stated: “Ghana must prioritize repaying debts to American companies before seeking additional IMF funding. The previous government repeatedly failed to meet these debt obligations.

This call highlights the importance of Ghana’s financial relationships with key international partners, including companies like Twin City Energy, American Tower Company, and Kosmos Energy. These firms, which have contributed significantly to Ghana’s development, are awaiting resolution of outstanding payments.

Implications

These cases not only resulted in direct financial losses but also undermined investor confidence in Ghana’s energy sector. The analyst explained that these precedents highlight the dual challenge of adhering to international arbitration rulings and ensuring accountability in contract execution.

“A government that fails to honor its contractual obligations risks not only paying hefty penalties but also losing credibility in the eyes of international investors,” the analyst added.

Recommendations for the new administration

To address the issue, the analyst proposed several policy interventions. Chief among them is strengthening of the framework for public procurement and contract management. This would include stringent due diligence processes, transparency in awarding contracts, and regular monitoring of implementation milestones to ensure compliance with agreed terms.

Furthermore, the analyst urged the government to strengthen its capacity to resolve disputes through alternative dispute resolution (ADR) mechanisms, which are often more cost-effective than protracted court battles or arbitration proceedings. “By proactively engaging in ADR, the government can mitigate the financial and reputational risks associated with litigation or arbitration,” the analyst explained.

Additionally, the administration has been advised to implement a comprehensive audit of existing contracts, particularly in sectors prone to disputes, such as energy and infrastructure. This would help identify and address potential sources of conflict before they escalate into costly legal battles.

President Mahama’s commitment

The call to address judgment debts aligns with President John Dramani Mahama’s stated commitment to fiscal discipline and sustainable economic management. During his inauguration, he underscored the need to restore macroeconomic stability and ensure prudent use of public resources.

The analyst argued that minimising judgment debts should form a critical pillar of these efforts, as it directly impacts public expenditure. “Reducing judgment debts is not just about saving money; it is about signaling to both domestic and international stakeholders that Ghana is serious about financial governance and accountability,” the analyst said.

The new finance minister, Casiel Ato Forson, will play a critical role in navigating these priorities while implementing reforms that enhance economic resilience. With a renewed commitment to collaboration and financial stability, Ghana is poised to strengthen its standing in the global arena.

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