The International Monetary Fund (IMF) has urged Ghana to sustain quarterly electricity tariff adjustments. This action is crucial for reducing fiscal risks within the energy sector.
The sector's shortfall decreased to US$1.4 billion in 2025 from US$1.6 billion in 2024. Despite this improvement, it continues to exert significant pressure on Ghana's public finances. The IMF, in its 2026 Article IV Consultation and Sixth Review under the Extended Credit Facility (ECF), stressed the need for sustained reforms. These reforms aim to consolidate gains and enhance the sector's financial sustainability.
Ghana's energy sector has historically been a major drain on state resources. The IMF report highlighted that challenges persist in transforming the sector from a source of fiscal risk into a driver of inclusive growth. This ongoing issue affects the government's ability to fund other essential services and maintain macroeconomic stability. The energy sector's financial health is a key component of Ghana's broader economic stability, influencing investor confidence and the national budget.
The IMF attributed the recent improvement to several factors. These include tariff adjustments, enhanced revenue collection by the Electricity Company of Ghana (ECG), and reduced reliance on liquid fuels for power generation. The cedi's appreciation and increased payments to energy suppliers through the Cash Waterfall Mechanism also contributed. The Cash Waterfall Mechanism is a system designed to ensure timely and transparent payments to power generators and fuel suppliers.
The sector's shortfall is projected to be about US$1.1 billion in 2026. This deficit is primarily driven by high collection and distribution losses and expensive generation contracts. The Public Utilities Regulatory Commission (PURC) adjusted electricity tariffs by reducing them by 4.81 per cent in April 2026. They then increased them by 3.49 per cent in July 2026, consistent with the quarterly adjustment mechanism.
Maintaining this tariff adjustment framework is critical for narrowing the energy sector's financing gap. It also improves cost recovery and ensures the sector can meet its obligations to independent power producers (IPPs) and fuel suppliers. The IMF acknowledged government efforts to reduce legacy debts in the sector. Net payables to IPPs and fuel suppliers declined to US$1.7 billion by March 2026 from US$2.1 billion at the end of 2024. This reduction followed debt renegotiations and government interventions.
The Fund recommended strict adherence to quarterly tariff reviews. It also advised regular publication of audit reports on ECG’s revenue collection accounts. Full implementation of the Cash Waterfall Mechanism is another key recommendation. The report also identified increased private-sector participation in electricity distribution as a crucial reform. A transaction adviser has been appointed to facilitate the procurement of concessionaires, with awards expected by June 2027.
Private-sector involvement is expected to reduce technical and commercial losses. It should also improve revenue mobilisation and strengthen operational efficiency within the power distribution system. Achieving a financially sustainable energy sector requires continued policy discipline and reforms beyond the current IMF-supported programme. A more efficient and financially sound energy sector is necessary to support economic growth, attract investment, and reduce pressure on public finances.