The U.S. has canceled 190 million dollars in grants to Ghana under the “Power Africa” initiative in response to the Ghanaian government’s termination of a contract with a private utility provider, the U.S. embassy said.
The Millenium Challenge Corporation (MCC), a U.S. government foreign assistance agency, agreed in 2014 to provide 498 million dollars in funding to Ghana’s power sector to help stimulate further private investment.
The initiative, launched in 2013 by then president Barack Obama and aiming to bring electricity to tens of millions of households in Africa, was the largest by the U.S. under Power Africa.
One reform under the agreement involved handing over operations at state-run Electricity Company of Ghana (ECG) in March to Ghana Power Distribution Services (PDS), a consortium led by Philippine electricity company Meralco (MER.PS).
But Ghana’s finance minister informed U.S. officials on Saturday that the government was cancelling the 20-year concession it had signed with PDS, saying payment guarantees provided were not satisfactory.
In a statement on Tuesday, the U.S. embassy said the decision to terminate the contract was unjustified and that the MCC was, therefore, cancelling 190 million dollars in grants.
The remaining 308 million dollars will still be disbursed.
“The U.S. underscores the importance of contract sanctity as essential to a conducive investment climate and a pre-condition for inclusive economic growth,” it said.
Ghana’s Information Minister Kojo Nkrumah on Wednesday said that the U.S. announcement did not represent “a crisis of confidence” between the two governments.
“It has been a difference in opinion which we have mutually agreed to respect,” he said.
Meralco did not immediately respond to a request for comment.
