The International Monetary Fund (IMF) has urged Ghana to maintain quarterly electricity tariff adjustments, warning that persistent inefficiencies in the power sector continue to pose significant fiscal risks despite a modest decline in the sector’s financial shortfall.
In its 2026 Article IV Consultation and Sixth Review under the Extended Credit Facility (ECF), the Fund noted that the energy sector’s revenue-cost gap declined to **US1.6 billion (1.4 per cent of GDP) in 2024. However, the shortfall remains a substantial burden on public finances, with the sector projected to record a US$1.1 billion gap in 2026.
“Despite progress, challenges remain in transforming the sector from a source of fiscal risks to a driver of inclusive growth,” the IMF said.
Modest gains, fragile foundations
The Fund attributed the improvement to a combination of factors: quarterly tariff adjustments, enhanced revenue collection by the Electricity Company of Ghana (ECG), reduced reliance on costly liquid fuels in power generation, cedi appreciation, and increased payments to energy suppliers through the Cash Waterfall Mechanism (CWM).
However, the IMF cautioned that the gains remain fragile, driven largely by favourable exchange rate movements rather than structural efficiency improvements. Three persistent challenges continue to undermine the sector: tariffs below cost-recovery levels, high technical and commercial losses, and weak revenue collection.
Distribution losses remain stubbornly high at 27 per cent, above the World Bank’s target of 24 per cent by end-2026. Ghana’s collection rate stands at approximately 86 per cent, with government institutions alone accounting for 16 per cent of unpaid bills by the end of 2025.
Tariff adjustments under scrutiny
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 adjustment framework. Tariffs had previously risen nearly 10 per cent in January 2026.
The IMF stressed that maintaining the tariff adjustment framework is “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”.
Legacy debt reduction
The government has made substantial progress in reducing legacy debts. Net payables owed to IPPs and fuel suppliers declined to **US2.1 billion at the end of 2024, following debt renegotiations and government interventions.
The Ministry of Finance made payments totalling approximately US$2 billion to IPPs and fuel suppliers, including replenishment of the World Bank-guaranteed letter of credit for gas from the Sankofa field. The government also secured savings through renegotiation of power purchase agreements and legacy debt obligations.
Private sector push
The IMF identified increased private-sector participation in electricity distribution as a key reform priority. A transaction adviser has been appointed to facilitate the procurement of concessionaires, with concessions expected to be awarded by June 2027.
The Fund said private-sector participation is expected to reduce technical and commercial losses, improve revenue mobilisation and strengthen operational efficiency within the power distribution system.
Beyond the programme
The IMF stressed that achieving a financially sustainable energy sector would require continued policy discipline and reforms beyond the current IMF-supported programme. Ghana is transitioning from the ECF to a non-financing Policy Coordination Instrument (PCI), which will maintain pressure on reforms through regular monitoring and policy coordination.
“A more efficient and financially sound energy sector is necessary to support economic growth, attract investment and reduce pressure on public finances,” the Fund said.
The IMF 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.
Economist Professor Godfred Bokpin has warned that persistent weaknesses in the energy sector continue to pose a “significant threat” to fiscal stability, noting that extra-budgetary allocations to the sector “exceed the combined budgetary allocation to the Ministry of Health, Food and Agriculture, and Education”.
