Accra: The International Monetary Fund (IMF) has endorsed the liberalisation of the Electricity Company of Ghana (ECG), advocating for private sector participation in the state-owned electricity distributor. The IMF believes that involving the private sector will attract crucial investment and technical expertise necessary to address legacy debts and make the energy sector financially sustainable.
According to Ghana News Agency, this endorsement was part of the IMF's July country report on the fourth review of Ghana's US$3 billion three-year Extended Credit Facility (ECF) arrangement. The report identified the energy sector as a significant fiscal risk. The Electricity Company of Ghana is responsible for electricity distribution in southern Ghana, covering six administrative regions: Greater Accra, Eastern, Volta, Ashanti, Western, and Central.
The Fund highlighted that without policy action, the annual energy sector shortfall could reach US$2.2 billion by 2025. This shortfall is attributed to ECG's substantial commercial and technical losses, as well as the slow adjustment of electricity tariffs amidst exchange rate fluctuations and increased power generation costs, particularly due to reliance on expensive liquid fuels.
The IMF report expressed support for the Ghanaian cabinet's decision to open ECG's operations to private sector involvement. It noted efforts towards financial sustainability in the energy sector, including resuming quarterly electricity tariff increases. Progress in addressing the energy sector's challenges was observed, such as the 14.75 percent increase in electricity tariffs in April 2025 by the Public Utilities Regulatory Commission (PURC) and the improvement in compliance with the Cash Waterfall Mechanism in 2025.
However, the report indicated discrepancies between ECG's validated and declared collections (GHS5.3 billion) and between Cash Waterfall Mechanism allocations and actual payments (GHS3.9 billion). To address the shortfall and enhance efficiency, the IMF recommended full and consistent implementation of the Cash Waterfall Mechanism, ensuring regular payments to Independent Power Producers (IPPs) and fuel suppliers, addressing legacy arrears, and improving transparency, governance, and accountability.
The IMF urged the government to expedite the implementation of the Energy Sector Recovery Programme measures, including a multi-year tariff assessment to reflect changes in energy production costs by the end of September 2025, enhancing revenue collection, and limiting the accumulation of arrears.
In a previous interview with the Ghana News Agency, Nana Amoasi VII, Executive Director of the Institute for Energy Security, stated that privatisation could bring in expertise, investment, and efficiency improvements needed to address infrastructure challenges and improve service delivery in the power sector. He emphasized the need for a well-designed, transparent approach to avoid the pitfalls experienced in the 2019 failed agreement with Power Distribution Services (PDS), which resulted in losing US$190 million in investment under the Millennium Challenge Corporation (MCC) power compact.
Ms. Alice Albright, CEO of MCC, mentioned in May 2024 that while the Corporation had no immediate plans, it remained open to collaborating with Ghana for the long-term sustainability of related infrastructure and financial recovery in the energy sector.
