The International Monetary Fund (IMF) has identified the Electricity Company of Ghana (ECG) as the central weak link in the country’s power sector, warning that persistent operational and financial challenges at the state-owned distributor continue to expose Ghana’s public finances to significant fiscal risks.
In its latest Selected Issues Paper, the IMF said that despite reforms implemented under Ghana’s IMF-supported Extended Credit Facility (ECF) programme, the energy sector continues to record annual financial shortfalls equivalent to between 1 and 1.5 percent of Gross Domestic Product (GDP), requiring repeated government bailouts through budgetary transfers and arrears payments.
According to the report, the electricity sector recorded a financing gap of approximately US$1.4 billion in 2025, representing 1.2 percent of GDP. Although this marked a slight improvement from the estimated US$1.6 billion deficit in 2024, the Fund stressed that the sector remains one of the country’s largest fiscal liabilities.
The IMF attributed the persistent deficits to a combination of delayed electricity tariff adjustments, high technical and commercial losses, weak revenue mobilisation, electricity theft and the continued accumulation of debts owed to independent power producers (IPPs) and fuel suppliers.
“The sector continues to generate sizable financial shortfalls and has accumulated significant arrears to independent power producers and fuel suppliers,” the report stated.
The Fund warned that unless these structural challenges are addressed, the government will continue to divert scarce public resources to support the sector, reducing the fiscal space available for critical investments in health, education, infrastructure and social protection.
A major focus of the IMF’s assessment was the financial performance of the Electricity Company of Ghana (ECG), which it described as the backbone of the electricity value chain.
The report noted that nearly all revenues generated across the power sector flow through ECG, making the company’s operational efficiency crucial to the financial sustainability of the entire industry.
However, ECG continues to face significant operational challenges, including weak bill collection, high distribution losses, underreporting of revenues, electricity theft and inefficiencies in metering and customer management.
These weaknesses, according to the IMF, prevent the company from collecting enough revenue to meet its payment obligations to electricity generators, fuel suppliers and other market participants.
The report noted that government support to the sector increased substantially in 2025, with transfers reaching approximately US$2 billion, compared to US$1.5 billion in 2024.
Around half of these funds were used to finance current payment obligations, while the remainder went toward clearing legacy debts accumulated over several years.
The IMF also highlighted the wider economic consequences of the sector’s financial challenges, noting that unreliable electricity supply continues to affect businesses across Ghana.
Manufacturing firms, in particular, remain vulnerable to power disruptions, forcing many companies to rely on expensive backup generators that increase production costs and reduce competitiveness.
While acknowledging progress made under the IMF-supported reform programme, the Fund said several important measures have helped improve the sector’s financial outlook.
These include more regular electricity tariff adjustments, stronger implementation of the Cash Waterfall Mechanism to prioritise payments across the value chain, and gradual reductions in outstanding arrears.
Nevertheless, the IMF cautioned that these improvements have not been sufficient to eliminate the sector’s underlying structural weaknesses.
To place the energy sector on a sustainable financial footing, the Fund urged the government to continue implementing cost-reflective tariff adjustments, improve ECG’s operational performance, strengthen revenue collection systems, reduce technical and commercial losses, curb electricity theft and accelerate private sector participation in electricity distribution.
According to the IMF, sustaining these reforms will be essential to reducing the sector’s dependence on government financial support, restoring fiscal discipline and protecting Ghana’s economy from recurring energy-related fiscal pressures.
CREDIT: MAVIS FANTEVI