Ghana’s energy sector is grappling with mounting challenges, prompting the International Monetary Fund (IMF) to call for decisive implementation of the Energy Sector Recovery Programme (ESRP) to restore stability and fiscal balance.
In its latest staff report, the IMF highlighted a significant energy sector deficit in 2024, which surpassed earlier projections by 0.6 percentage points of GDP. These financial shortfalls have worsened pressures on public finances, largely due to persistent inefficiencies, including the Electricity Company of Ghana’s (ECG) sluggish implementation of the Cash Waterfall Mechanism. The delays have escalated arrears owed to Independent Power Producers (IPPs) and fuel suppliers.
Despite these hurdles, the IMF expressed confidence in upcoming reforms. A new energy sector strategy, designed to cut operational costs and boost revenue collection, is expected to be finalized by June 2025 and receive Cabinet approval by September 2025.
To address these persistent challenges, the IMF has outlined a series of medium-term measures:
• Debt Audits: Validation audits for legacy energy sector debts covering 2023 and 2024 are to be completed by March and August 2025, respectively.
• Tariff Adjustments: The Public Utilities Regulatory Commission (PURC) will continue implementing quarterly tariff reviews as part of its 2022-2025 Electricity and Water Major Tariff Review framework. These periodic adjustments, informed by technical analyses, are aimed at improving financial stability.
• Operational Efficiency: PURC will undertake a thorough review of critical inefficiencies within the energy sector.
To limit growing losses, a 3% average electricity tariff increase was rolled out in October 2024.
The IMF report also revealed that by December 2023, energy sector arrears, including longstanding legacy debts, had risen to $2.1 billion, representing 2.8% of GDP. The IMF warned that without timely implementation of these reforms, the energy sector will remain a significant fiscal risk. It stressed that bold and prompt measures are necessary to mitigate vulnerabilities and ensure the sector’s long-term stability.
Credit: Citinewsroom
