Accra, March 11, 2025 – The Ghanaian government has unveiled a series of interventions in the 2025 Budget to tackle the country’s deepening energy sector crisis, which has been plagued by inefficiencies, debts, and financing shortfalls.
Presenting the Budget Statement and Economic Policy in Parliament, Finance Minister Dr. Cassiel Ato Forson described the energy sector’s financial situation as unsustainable, revealing that the government spent GH¢20.8 billion in 2024 to keep the sector afloat. Without immediate intervention, energy sector financing shortfalls could balloon to GH¢35 billion in 2025 and GH¢140 billion by 2026.
Key Energy Sector Reforms and Budget Allocations
1. Addressing Debts and Financial Risks
The government has inherited a GH¢68 billion debt owed by the Electricity Company of Ghana (ECG) and US$1.73 billion in arrears to Independent Power Producers (IPPs).
To resolve these financial risks, the budget proposes: A comprehensive audit of all energy sector debts before making payments; Renegotiation of power purchase agreements (PPAs) with IPPs to reduce fixed capacity and operational costs; Increased natural gas supply to reduce reliance on expensive liquid fuels.
“Without reforms, the energy sector will continue to drain national resources at the expense of essential services like healthcare, education, and job creation,” Dr. Forson warned.
2. Electricity Tariff Adjustments and Cost Recovery
As part of the IMF-supported Economic Recovery Programme, the Public Utilities Regulatory Commission (PURC) will: Continue implementing Quarterly Tariff Adjustments to reflect inflation, exchange rates, and generation costs; Undertake a major tariff review in Q4 2025 to account for rising capacity charges and capital expenditures; Increase the Weighted Average Cost of Gas (WACOG) from $7.836 per MMBtu to $8.45 to reflect changing market conditions. Additionally, subsidies on industrial gas tariffs for some companies will be removed to ensure fairness and sustainability.
3. Improving Revenue Collection and Efficiency
The government plans to enhance revenue collection and efficiency by: Implementing a Private Sector Participation (PSP) strategy for ECG and Northern Electricity Distribution Company (NEDCo); Deploying smart metering solutions to curb revenue losses and power theft; Strengthening ECG’s ability to collect overdue payments.
4. Reforming the Energy Sector Levies
To improve financial stability, the Energy Sector Levies Act (ESLA) will be revised to consolidate multiple levies into a single charge. The following levies will now be combined: Energy Debt Recovery Levy, Energy Sector Recovery Levy (Delta Fund), Sanitation & Pollution Levy.
However, levies supporting road maintenance and electrification projects, such as the Road Fund Levy and the National Electrification Levy, will remain unchanged.
“We are restructuring the energy sector financing model to make it sustainable, while ensuring that consumers and businesses are not unfairly burdened,” Dr. Forson explained.
5. Renewable Energy and Energy Transition Plans
To reduce reliance on expensive thermal power and increase energy security, the government will: Promote investments in solar and wind power projects; Encourage private sector participation in renewable energy production; Strengthen the regulatory framework to ensure better planning and integration of renewables into the national grid.
Outlook: A More Sustainable Energy Sector
The Finance Minister emphasized that urgent reforms are necessary to ensure Ghana’s energy sector does not collapse under the weight of its debts.
“We cannot continue to subsidize inefficiencies while accumulating unsustainable debts. These reforms will put the energy sector on a path to financial sustainability and ensure affordable, reliable power for all Ghanaians,” Dr. Forson stated.
With increased tariffs, better cost recovery, and stronger revenue management, the government aims to gradually reduce state intervention in the energy sector, freeing up resources for other critical sectors.
The proposed measures will now be debated in Parliament, with stakeholders keenly watching how they will affect electricity prices, industry growth, and overall economic stability.
Source: Clement Akloloh||parliamentnews360.com
