"Finance Minister Says Energy Sector had $1.5bn Annual Shortfall Prior to Assumption of Office by President Mahama"

Finance Minister Says Energy Sector had $1.5bn Annual Shortfall Prior to Assumption of Office by President Mahama

Finance Minister, Dr Cassiel Ato Forson, has revealed that the government inherited a severely distressed energy sector burdened by annual financing shortfalls exceeding $1.5 billion—posing significant risks to public finances and macroeconomic stability.

Addressing Parliament during the presentation of the 2025 Mid-Year Budget Review on Thursday, July 24, Dr Forson characterised the energy sector as “bleeding,” citing structural inefficiencies, unsustainable debts, and problematic legacy contracts.

“We inherited a bleeding energy sector with annual financing shortfalls over $1.5 billion,” the Minister told lawmakers.

The financial gap, he explained, had led to the build-up of arrears across the energy value chain, delayed payments to independent power producers (IPPs), and a deterioration in investor confidence—further exacerbating pressure on the national budget.

Dr Forson attributed the sector’s woes to poorly structured power purchase agreements, excess capacity payments, and inefficiencies in revenue collection and technical operations.

Reforms Underway

In response, the government has begun implementing a series of corrective measures aimed at restoring financial discipline and operational efficiency. These include the renegotiation of existing power contracts, enhancing revenue mobilisation within the sector, and improving governance and transparency.

“We have started renegotiating some of the power purchase agreements and are also working to strengthen revenue collection,” Dr Forson said.

The Finance Minister reaffirmed the administration’s commitment to long-term energy sector reform, stating that restoring financial viability is critical not only to ensuring uninterrupted power supply but also to safeguarding Ghana’s broader economic recovery.

The announcement comes as part of a broader fiscal update in which the government is attempting to balance recovery-driven spending with macroeconomic stability, under the framework of its ongoing IMF-supported reform programme.