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Home»Economy»IMF flags Ghana’s energy sector deficit, pushes for swift reforms
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IMF flags Ghana’s energy sector deficit, pushes for swift reforms

AdminBy AdminDecember 24, 2024No Comments0 Views
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Ghana’s energy sector remains under pressure as the International Monetary Fund (IMF) highlights persistent challenges and calls for urgent reforms under the Energy Sector Recovery Programme (ESRP) to restore fiscal stability.

In its latest staff report, the IMF revealed that Ghana’s energy sector deficit for 2024 exceeded expectations, widening by 0.6 percentage points of GDP and further straining public finances.

Persistent inefficiencies, particularly the Electricity Company of Ghana’s (ECG) failure to effectively implement the Cash Waterfall Mechanism, have worsened arrears owed to Independent Power Producers (IPPs) and fuel suppliers.

Despite these challenges, the IMF expressed optimism about forthcoming reforms. A draft energy sector strategy aimed at cutting operational costs and boosting revenue collection is expected to be finalised by June 2025 and approved by Cabinet by September 2025.

To address the sector’s vulnerabilities, the IMF proposed key medium-term measures, including:

Debt Audits: Completion of legacy debt validation audits for 2023 and 2024 by March and August 2025, respectively.

Tariff Reforms: Quarterly tariff adjustments under the Public Utilities Regulatory Commission’s (PURC) 2022-2025 Electricity and Water Major Tariff Review, backed by technical analyses to ensure financial sustainability.

Operational Review: A thorough assessment of inefficiencies across the energy sector to be led by PURC.

As part of immediate steps, a 3% average electricity tariff increase introduced in October 2024 is already in effect to address growing losses.

The IMF report noted that as of December 2023, energy sector arrears, including legacy debts, stood at USD2.1 billion, equivalent to 2.8 per cent of GDP.

The IMF cautioned that the energy sector remains a significant fiscal risk, warning that “timely implementation of these reforms is essential to mitigating vulnerabilities and achieving sector stabilisation.”

ECG Energy sector GDP IMF
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