IMF urges Ghana to sustain quarterly electricity tariff adjustments
The IMF says Ghana must maintain quarterly electricity tariff adjustments and pursue further reforms to reduce the energy sector’s persistent burden on public finances.
The International Monetary Fund (IMF) has urged Ghana to sustain quarterly electricity tariff adjustments to reduce fiscal risks in the energy sector.
The sector shortfall declined to US$1.4 billion in 2025 from US$1.6 billion in 2024, but remained a significant pressure on public finances.
The IMF said in its 2026 Article IV Consultation and Sixth Review under the Extended Credit Facility (ECF) that sustained reforms were needed to consolidate the gains and improve the sector’s financial sustainability.
“Despite progress, challenges remain in transforming the sector from a source of fiscal risks to a driver of inclusive growth,” the IMF said.
The Fund attributed the improvement to tariff adjustments, enhanced revenue collection by the Electricity Company of Ghana (ECG), reduced use of liquid fuels in power generation, cedi appreciation and increased payments to energy suppliers through the Cash Waterfall Mechanism.
It said the sector’s shortfall was projected at about US$1.1 billion in 2026, driven largely by high collection and distribution losses and costly generation contracts.
The report noted that the Public Utilities Regulatory Commission (PURC) reduced electricity tariffs by 4.81 per cent in April 2026 before increasing them by 3.49 per cent in July 2026 under the quarterly tariff adjustment mechanism.
The IMF said maintaining the tariff adjustment framework was critical to narrowing the energy sector financing gap, improving cost recovery and ensuring the sector’s ability to meet obligations to independent power producers (IPPs) and fuel suppliers.
It also acknowledged government’s efforts to reduce legacy debts in the sector.
Net payables owed to IPPs and fuel suppliers declined to US$1.7 billion by March 2026 from US$2.1 billion at the end of 2024, following debt renegotiations and payments made through government interventions.
The Fund said the government secured savings through the renegotiation of power purchase agreements and legacy debt obligations, while making substantial payments to energy suppliers, including those linked to the Sankofa gas project.
It recommended 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.
It said a transaction adviser had been appointed to facilitate the procurement of concessionaires, with the concessions expected to be awarded by June 2027.
The IMF said private-sector participation was expected to reduce technical and commercial losses, improve revenue mobilisation 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 programme.
The Fund said a more efficient and financially sound energy sector was necessary to support economic growth, attract investment and reduce pressure on public finances.
Source: GNA