Accra: Dr Cassiel Ato Forson, the Finance Minister, has raised concerns about Ghana's energy sector, describing it as a 'ticking time bomb' due to financial challenges exacerbated by non-cost reflective tariffs and unsustainable energy subsidies. He emphasized the dire financial state of the sector, predicting cumulative financial shortfalls to exceed nine billion dollars by 2026, notwithstanding government interventions. Dr Forson shared these insights during the National Economic Dialogue at the Accra International Conference Centre.
According to Ghana News Agency, Dr Forson highlighted the Electricity Company of Ghana (ECG) as a critical area requiring attention, citing significant distribution and collection losses. He noted that only 62 per cent of the total energy purchased by ECG is collected, with 65 per cent of that amount used to pay for supplies through the cash quarter mechanism. The remaining 35 per cent of ECG's revenue, he pointed out, is spent on internal expenses during non-operational periods.
The Finance Minister expressed concern over the disconnect between tariffs and the true cost of service provision, stating that about 50 per cent of the cost is not reflected in tariffs. However, he maintained that tariffs should not be utilized to reward inefficiencies within ECG and other parts of the system. He revealed that unpaid legacy arrears in the energy sector reached $1.3 billion by the end of 2022, with annual sector shortfalls projected at $2.2 billion in 2024, despite significant government financial support.
Dr Forson attributed the sector's troubles to factors such as the absence of political will to enforce cost-reflective tariffs, limited renewable energy capacity, and inefficiencies within the ECG. He urged for urgent and radical measures to tackle the crisis to avert further financial strain on the economy. He pointed out the necessity of addressing generational costs caused by political inaction and the limited inclusion of renewable energy in the energy mix. Distribution and collection losses at ECG were also identified as significant issues.
He stressed the importance of a comprehensive approach to reform the energy sector, which would involve addressing inefficiencies, promoting renewable energy, and implementing sustainable tariff policies. He warned that without immediate action, the financial challenges within the sector would continue to worsen, posing a substantial risk to Ghana's economic stability.
