The challenges facing the energy sector are primarily financial rather than the maintenance issues raised by the Electricity Company of Ghana (ECG). The government’s debt to Independent Power Producers (IPPs) is severely affecting the sector’s balance sheet. Member of Parliament for North Tongu highlighted this during an interview on the “Adekyee Mu Nsem” morning show on Ahotor 92.3 FM, hosted by Citizen Kofi Owusu in Accra.
The power outages that began last year were exacerbated by the government’s failure to provide transparent information on the situation. Reports indicate that Ghana’s energy sector has been experiencing persistent under-recovery of costs. As of 2019, the cumulative sector shortfall (net arrears) amounted to USD 2,748 million and was projected to increase to USD 12,564 million by the end of 2023 if no action was taken.
In another development, Fitch affirmed Ghana’s sovereign rating (B/Stable) in October 2020, anticipating a gradual recovery in economic performance and fiscal revenue post-pandemic shock. However, Ghana’s public finances are complicated by domestic arrears and contingent liabilities, contributing to its public debt stock.
In December 2020, the Ministry of Finance announced progress on the Energy Sector Recovery Programme (ESRP), including clearing USD 1 billion in debt to IPPs and negotiating deals with power-generation companies to potentially save up to USD 5 billion. However, there are concerns that if these efforts fail, additional liabilities of up to USD 12 billion could burden the government.
Ghana’s energy sector faces both existing debt and ongoing losses due to operational inefficiencies and an uneconomical tariff structure. Efforts to clear arrears and reform the sector through the ESRP have been inconsistent.
Looking ahead, IPPs report that their total debt has increased from $2 billion in June 2023 to $2.2 billion presently. Meanwhile, the Ranking Member of the Energy Committee of Parliament, John Jinapor, revealed that ECG is struggling with a colossal debt of $1.5 billion.
Jinapor criticized ECG for its failure to meet financial obligations to IPPs, incomplete settlement of electricity bills, and what he perceives as wasteful spending on items like cables and malfunctioning meters. He cited a report from the Public Utilities Regulatory Commission (PURC) alleging mismanagement of funds by ECG, diverting money from debt repayment to other expenses.
Jinapor urged ECG to provide transparent explanations for recent power outages and to address financial mismanagement issues.
Contact: AYM Kukah
Email: kukahalexander7@gmail.com
