Ghana’s energy sector challenges remain a concern, with the International Monetary Fund (IMF) urging strict adherence to the Energy Sector Recovery Programme (ESRP) to stabilize the sector and ensure fiscal sustainability.

The IMF’s latest staff report highlights a larger-than-expected deficit in 2024, straining public finances as sector shortfalls are projected to exceed targets by 0.6 percentage points of GDP.

Persistent inefficiencies, particularly the poor implementation of the Cash Waterfall Mechanism, continue to fuel arrears owed to Independent Power Producers (IPPs) and fuel suppliers by the Electricity Company of Ghana (ECG).

Despite these setbacks, the IMF remains optimistic about upcoming reforms.

A draft energy sector strategy, designed to cut operational costs and improve revenue collection, is set to be finalized by June 2025 and adopted by Cabinet by September 2025.

To address mounting challenges, the IMF outlines key medium-term measures, including the completion of energy sector legacy debt validation audits for 2023 and 2024 by March and August 2025, respectively.

The Public Utilities Regulatory Commission (PURC) is expected to play a pivotal role by implementing quarterly tariff adjustments as part of the 2022-2025 Electricity and Water Major Tariff Review.

These adjustments, supported by technical notes to justify tariff decisions, aim to ensure financial sustainability.

Additionally, PURC will conduct a comprehensive review of key operational inefficiencies across the sector.

Against this backdrop, a 3% average electricity tariff increase introduced in October 2024 seeks to curb rising sector losses.

As of December 2023, energy sector arrears, including legacy debts, stood at $2.1 billion, equivalent to 2.8% of GDP.

While the IMF warns that the energy sector remains a significant fiscal risk, it underscores that timely and effective implementation of these reforms could mitigate vulnerabilities and stabilize the sector.

Source: Citinewsroom.com