IMF urges Ghana to sustain quarterly electricity tariff adjustments‎

The International Monetary Fund (IMF) has urged Ghana to maintain its quarterly electricity tariff adjustment mechanism as part of efforts to reduce persistent fiscal risks and improve the financial sustainability of the energy sector.

The Fund said although Ghana's energy sector shortfall declined from US$1.6 billion in 2024 to US$1.4 billion in 2025, the deficit remained a significant burden on public finances.

The recommendation was contained in the IMF's 2026 Article IV Consultation and Sixth Review under Ghana's Extended Credit Facility (ECF) programme, which assessed the country's economic performance and ongoing structural reforms.

The IMF said Ghana had made progress in addressing financial challenges in the energy sector but warned that further reforms were necessary to prevent the sector from continuing to generate significant fiscal pressures.

“Despite progress, challenges remain in transforming the sector from a source of fiscal risks to a driver of inclusive growth,” the IMF said.

The IMF projects that Ghana's energy sector shortfall could decline to approximately US$1.1 billion in 2026.

However, it warned that significant structural challenges remain, particularly high electricity collection and distribution losses and expensive power generation contracts.

The Fund therefore stressed that maintaining the quarterly tariff adjustment mechanism would be critical to closing the sector's financing gap and improving cost recovery.

The mechanism allows the Public Utilities Regulatory Commission (PURC) to periodically adjust electricity tariffs in response to changes in factors including exchange rates, inflation, fuel prices and other electricity generation and distribution costs.

The report noted that PURC reduced electricity tariffs by 4.81 per cent in April 2026, before increasing them by 3.49 per cent in July 2026 under the quarterly tariff adjustment framework.

The IMF considers the continuation of the mechanism important because predictable tariff adjustments can help electricity distributors and other energy sector participants recover a greater proportion of their costs.

The Fund said the framework would also strengthen the ability of the sector to meet its obligations to independent power producers (IPPs) and fuel suppliers.

Ghana's energy sector has historically created significant financial obligations for the government because of weaknesses in revenue collection, high system losses, expensive generation contracts and accumulated debts to power producers and fuel suppliers.

According to the IMF, the reduction in the sector's shortfall in 2025 was supported by several factors.

These included electricity tariff adjustments, improved revenue collection by the Electricity Company of Ghana (ECG), reduced reliance on liquid fuels for electricity generation and the appreciation of the Ghana cedi.

The Fund also pointed to increased payments to energy suppliers through the Cash Waterfall Mechanism, which helped improve the flow of funds within the sector.

The IMF also acknowledged government efforts to reduce legacy debts owed to energy sector participants.

Net payables to IPPs and fuel suppliers declined from US$2.1 billion at the end of 2024 to US$1.7 billion by March 2026.

The reduction followed debt renegotiations and payments made through government interventions.

The IMF said Ghana had secured savings through the renegotiation of power purchase agreements and legacy debt obligations while making substantial payments to energy suppliers.

Some of the payments were linked to obligations associated with the Sankofa gas project.

The Fund nevertheless cautioned that debt reduction must be accompanied by reforms that prevent the accumulation of new arrears.

The IMF recommended several measures to strengthen financial management and accountability in the energy sector.

Among them is strict adherence to the quarterly electricity tariff review mechanism.

The Fund also called for the regular publication of audit reports on ECG's revenue collection accounts, saying greater transparency would help strengthen confidence in the sector and improve accountability.

It further urged the government to fully implement the Cash Waterfall Mechanism, which is designed to ensure that revenues collected within the electricity sector are distributed according to agreed priorities.

The IMF also identified increased private-sector participation in Ghana's electricity distribution system as a key structural reform.

According to the report, a transaction adviser has already been appointed to facilitate the procurement of private concessionaires.

The concessions are expected to be awarded by June 2027.

The Fund believes greater private-sector participation could help reduce technical and commercial losses, improve revenue mobilisation and strengthen operational efficiency in electricity distribution.

The reform is particularly significant given longstanding concerns about ECG's collection performance and distribution losses.

The IMF stressed that achieving a financially sustainable energy sector would require continued policy discipline even after the conclusion of Ghana's current IMF-supported programme.

It said Ghana would need to maintain reforms aimed at improving cost recovery, reducing system losses, strengthening revenue collection and ensuring that electricity sector obligations are paid on time.

A financially sound energy sector, according to the Fund, would not only reduce pressure on government finances but also create a more reliable foundation for economic growth and private investment.

The IMF's recommendations therefore place continued tariff reforms, stronger financial controls, private-sector participation and improved operational efficiency at the centre of Ghana's efforts to address its longstanding energy sector challenges.

The government faces the delicate task of implementing these reforms while managing their impact on households and businesses, particularly at a time when electricity costs remain an important concern for consumers and industry.