Energy Sector: IMF programme aim to address under-recoveries projected to hit GHS 97bn – ACEP
Ghana’s quest for economic sustainability in the face of power sector risks has prompted the adoption of a $3 billion International Monetary Fund (IMF) program. In a recent report titled “Switching Gears: Protecting Ghana’s Economic Sustainability In the Face of Power Sector Risks,” the African Centre for Energy Policy (ACEP) outlines the key strategies proposed under the program.
The IMF’s focus lies on two critical aspects: the implementation of cost-reflective tariffs and the enhancement of distribution system efficiency. These measures aim to address long-standing issues that previous programs failed to adequately tackle.
Breaking away from past approaches, the IMF’s program introduces a more stringent framework, emphasizing the implementation of conditionalities and targets for the Ghanaian government. The primary objective is to establish a financially self-sustaining power sector, thereby alleviating the burden of excessive under-recoveries projected to reach a staggering GHS 97 billion between 2023 and 2026.
By addressing the under-recoveries, Ghana aims to unlock vital resources within its national budget. These freed-up funds can then be redirected towards socioeconomic investments, which have long suffered from inadequate allocations.
While crucial sectors such as agriculture, fisheries, roads, education, gender, and health require an estimated GHS 48 billion in capital expenditure, the projected under-recoveries in the power sector amount to GHS 97 billion. Resolving these under-recoveries would enable the government to potentially double its capital investment in sectors such as agriculture, fisheries, roads, education, gender and health.
The report highlights the immense benefits of tackling the power sector challenges head-on. By implementing cost-reflective tariffs and improving distribution system efficiency, Ghana aims to achieve a financially sustainable power sector that can facilitate socioeconomic growth and reduce dependence on budgetary allocations to cover under-recoveries.
This shift in focus marks a crucial step towards unlocking the potential for increased investments in sectors vital to Ghana’s overall development. As the country seeks to bolster its economic sustainability, the proposed power sector reforms are poised to pave the way for enhanced growth, improved service delivery, and reduced reliance on public funds.
