Ghana’s Energy Sector Debt Remains a Major Threat to Social Protection Spending Despite IMF Exit — Experts Warn at ActionAid Economic Justice Dialogue

Ghana’s growing energy sector debt continues to threaten the country’s economic recovery and social protection spending despite ongoing reforms under the International Monetary Fund (IMF) programme, experts have warned at ActionAid Ghana’s Economic Justice Dialogue aired on JoyNews.

The national dialogue, convened by ActionAid Ghana under the theme of economic justice and sustainable recovery beyond the IMF Extended Credit Facility (ECF), brought together policy experts, civil society actors, and economic analysts to assess Ghana’s post-IMF prospects and the structural risks confronting the economy.

Speaking at the dialogue, Executive Director at Transparency International, Ghana, Mrs. Addah, described the discussion as timely and necessary, stressing that Ghana must break its repeated cycle of IMF dependence through stronger accountability and prudent economic management.

“ActionAid Ghana’s Economic Justice Dialogue is a timely conversation. Ghana has gone to the IMF 18 times. It is high time we ensure our national targets are met. We must do a better job at public financial management. We have the laws, but the challenge is enforcement,” she stated.

Energy Sector Debt Remains a Major Fiscal Risk

Speaking during the discussion, Samuel Bekoe of the Centre for Extractives Development Africa (CEDA) cautioned that despite some progress under the IMF-supported reforms, Ghana’s energy sector remains burdened by deep-rooted structural inefficiencies and rising debt obligations.

“The power sector privatisation programme is partial, and it will not solve the structural problems within the energy sector,” Mr. Bekoe stressed.

According to IMF programme documents and Ghana’s Energy Sector Recovery Programme (ESRP), accumulated liabilities within the power sector continue to stem from legacy debts, excess power generation capacity payments, foreign exchange losses, fuel procurement costs, and weak revenue mobilisation systems.

Mr. Bekoe revealed that government allocations of approximately GH¢1.4 billion toward fuel purchases, operational costs, and legacy debt payments underscore the severity of the crisis.

He further estimated that Ghana’s cumulative energy sector debt exposure between 2023 and 2026 could reach nearly US$9 billion, making it one of the largest fiscal risks facing the country.

“The energy sector debt is one of the largest debts confronting the country, and it remains a major risk despite Ghana’s planned exit from the IMF programme,” he noted.

According to the World Bank, inefficiencies across Ghana’s electricity value chain continue to cost the country hundreds of millions of dollars annually. Collection losses and distribution inefficiencies within the Electricity Company of Ghana (ECG) have historically exceeded 25 percent, significantly above global utility efficiency benchmarks.

IMF Reforms Yielding Limited Gains

Ghana entered a US$3 billion IMF Extended Credit Facility programme in 2023 after public debt levels exceeded 90 percent of GDP amid soaring inflation, cedi depreciation, and mounting debt servicing pressures.

Energy sector reform remains a central component of the IMF-backed recovery programme. Mr. Bekoe acknowledged that some interventions under the Energy Sector Recovery Programme have improved payment discipline and revenue mobilisation.

Figures shared during the dialogue indicate that monthly sector revenue collections have increased from approximately GH¢940 million to GH¢1.5 billion in 2025, partly due to stricter implementation of the Cash Waterfall Mechanism (CWM).

The mechanism ensures that revenues generated within the power sector are transparently distributed among power producers, fuel suppliers, transmission operators, and debt servicing obligations.

“Before Ghana entered the IMF programme, we were not effectively implementing the Cash Waterfall Mechanism. Now, the process has improved and that has helped stabilise parts of the sector,” Mr. Bekoe explained.

Government renegotiation and termination of some underperforming Independent Power Producer (IPP) contracts have also reportedly reduced Ghana’s financial exposure by more than US$250 million, according to energy sector assessments.

Structural Inefficiencies Continue to Undermine Recovery

Despite these gains, participants at the dialogue warned that persistent structural weaknesses continue to undermine the sustainability of Ghana’s power sector.

These include high transmission losses, operational inefficiencies, unstable power supply, under-recovery of tariffs, non-payment by some public institutions, and heavy exposure to foreign exchange fluctuations linked to power purchase agreements.

Mr. Bekoe warned that continuously using public funds to absorb inefficiencies without implementing comprehensive reforms could derail Ghana’s economic recovery and deepen fiscal pressures.

“Allocating money to these problems without eliminating the inefficiencies means we are accepting and covering the problems instead of solving them,” he said.

He further cautioned that failure to address the structural weaknesses could push Ghana back into another IMF programme in the future.

“If we do not change these structural issues, Ghana may return to the IMF. The more the debt piles up, the more government will divert resources from critical sectors such as social protection to service these debts.”

ActionAid Calls for People-Centred Economic Reforms

ActionAid Ghana used the dialogue to reiterate calls for stronger public financial management, accountability, and economic policies that prioritise people over debt servicing.

The organisation warned that rising energy sector liabilities continue to threaten government investments in healthcare, education, livelihoods, and social protection programmes aimed at supporting vulnerable populations, especially women, young people, and low-income households.

The Country Director for ActionAid Ghana, John Nkaw reiterated that, the growing diversion of public resources toward debt servicing risks worsening inequality and undermining inclusive development efforts.

The organisation therefore called for comprehensive structural reforms within the energy sector, improved enforcement of existing laws, and transparent governance systems that protect public resources and strengthen social investment.

According to the IMF’s latest programme review, sustained reforms in Ghana’s energy sector remain critical to restoring debt sustainability and safeguarding macroeconomic stability beyond the IMF programme.

While Ghana’s economy has shown signs of gradual recovery, including easing inflation and relative exchange rate stability, experts at the dialogue warned that unresolved energy sector liabilities could continue to undermine long-term economic resilience if structural reforms are delayed.