IES Hails $1.47bn Energy Debt Clearance, Urges Reforms to Prevent Relapse
The Institute for Energy Security (IES) has commended government for settling US$1.47 billion in energy sector arrears during the 2025 fiscal year, describing the intervention as a decisive step that has stabilised Ghana’s power system and averted a potential grid collapse.
In a statement dated January 12, 2026, the energy policy think tank said the clearance of accumulated liabilities -at a time when the World Bank’s Partial Risk Guarantee (PRG) had been depleted and legacy debts were mounting – provided critical liquidity across the value chain and restored confidence among key sector partners.
According to IES, the settlement has had three immediate effects on energy and power security. First, the replenishment of the US$500 million PRG has reinstated a key credit-enhancement backstop for the Sankofa Gas Project, lowering sector risk and supporting continued gas production by international partners such as ENI and Vitol.
Second, payments amounting to about US$392.8 million to nine Independent Power Producers (IPPs), including Sunon Asogli and Karpowership, have improved operational liquidity, enabling plant maintenance and fuel procurement while reducing the risk of liquidity-induced outages.
Third, the settlement of roughly US$480 million in outstanding gas invoices has sent what IES termed a strong signal of fiscal credibility to upstream operators, including Tullow and Jubilee partners, reinforcing Ghana’s bankability as an energy investment destination.
However, the institute cautioned that the debt clearance, while historic, does not in itself resolve the structural weaknesses that have driven recurring arrears in the sector. Without reforms, IES warned, new legacy debts could re-emerge by 2027.
Key risks identified include persistent technical and commercial losses at the Electricity Company of Ghana (ECG) level, as well as exchange rate volatility arising from the mismatch between dollar-denominated IPP contracts and cedi-based revenue collections.
To lock in the gains from the intervention, IES urged government to accelerate structural measures, including insulating the Cash Waterfall Mechanism from political interference to ensure automatic and equitable distribution of sector revenues. It also called for an aggressive rollout of smart metering to protect revenues, prioritisation of domestic gas over imported LNG to reduce costs, and full transparency in the renegotiation of IPP agreements to ensure value for money.
“The 2025 fiscal year marks a turning point,” the institute said, adding that the ultimate test of the current reset would be government’s ability to sustain a zero-arrears policy through 2026 and beyond.
