The International Monetary Fund (IMF) has issued a strong and repeated call to Ghana to sustain quarterly electricity tariff adjustments, a move deemed critical to mitigating fiscal risks within the nation’s energy sector. This directive follows a concerning decline in the sector’s revenue, reaching a minimum of US$1.4 billion in 2025 from US$1.6 billion in 2024, a figure that underscores a significant pressure on Ghana’s public finances. The IMF’s 2026 Article IV Consultation and Sixth Review under the Extended Credit Facility (ECF) emphasizes the necessity of consolidating gains and bolstering the sector’s financial sustainability, stating that sustained reforms are essential.
The IMF attributes this stabilization to the ongoing adjustments to electricity tariffs, enhanced revenue collection efforts by the Electricity Company of Ghana (ECG), reduced liquid fuel usage, increased cedi appreciation, and increased payments to energy suppliers through the Cash Waterfall Mechanism. Specifically, the Fund highlighted that the sector’s shortfall, projected at approximately US$1.1 billion in 2026, is largely driven by high collection and distribution losses, alongside substantial generation contract costs. The report noted that the Public Utilities Regulatory Commission (PURC) has implemented a 4.81% quarterly tariff increase in April 2026, followed by a 3.49% increase in July 2026, reflecting the existing tariff adjustment framework. The IMF stresses that maintaining these tariff adjustments is vital to narrowing the energy sector’s financing gap, improving cost recovery, and ensuring the sector’s ability to meet its obligations to independent power producers (IPPs) and fuel suppliers.
Furthermore, the IMF acknowledges the government’s efforts to reduce legacy debts within the sector. It reported a decline in net payables owed to IPPs and fuel suppliers to US$1.7 billion by March 2026, compared to US$2.1 billion at the end of 2024, following renegotiations and payments made through government interventions. The IMF secured savings through renegotiation of power purchase agreements and legacy debt obligations, while also making substantial payments to energy suppliers, including those linked to the Sankofa gas project. The IMF recommends strict adherence to quarterly tariff reviews, regular publication of audit reports on ECG’s revenue collection accounts, and full implementation of the Cash Waterfall Mechanism. The report also identified increased private-sector participation in electricity distribution as a key reform, with the IMF advocating for the procurement of concessionaires, with concessions expected to be awarded by June 2027. The IMF cautioned that achieving a financially sustainable energy sector requires continued policy discipline and reforms beyond the current IMF-supported program. The report underscores that a more efficient and financially sound energy sector is necessary to support economic growth, attract investment, and reduce pressure on public finances. It further emphasized that a transaction adviser has been appointed to facilitate the procurement of concessionaires, with the concessions expected to be awarded by June 2027. The IMF stated that private-sector participation was expected to reduce technical and commercial losses, improve revenue mobilization, and strengthen operational efficiency within the power distribution system. It stressed that achieving a financially sustainable energy sector would require continued policy discipline and reforms beyond the current IMF-supported program.”
Source: Adomonline.com
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