The government has announced significant measures aimed at reducing, if not completely eliminating, the ongoing financial support provided to the Electricity Company of Ghana (ECG) for addressing energy sector shortfalls.
According to Dr. Amin Adam, this initiative aims to enhance the cost and operational efficiency of ECG, thereby minimizing the emergency liabilities it places on the Ministry of Finance.
Dr. Adam shared this information in response to a question from the Ghana News Agency during a press briefing at the recent International Monetary Fund (IMF)/World Bank Group (WBG) Annual Meetings held in Washington, DC.
In 2024 alone, the government has allocated approximately GHS18 billion (US$1.2 billion) to cover energy sector shortfalls, enabling ECG to fulfill its payment obligations to Independent Power Producers (IPPs) and other participants in the energy value chain, including the Volta River Authority (VRA), Bui Power Authority (BPI), Ghana National Gas Company, and Ghana Grid Company (GRIDCo).
The shortfalls have largely stemmed from losses incurred due to unpaid bills, inefficiencies in metering and billing systems, and other operational challenges, which have hindered ECG’s ability to compensate value chain players in a timely manner.
Dr. Amin Adam emphasized that the challenges, which the African Centre for Energy Policy (ACEP) has labeled “unsustainable,” will be significantly addressed through collaborative initiatives across the sector.
“This issue can no longer be solely addressed by energy sector players. Therefore, the Finance Ministry is actively involved in negotiating necessary measures for implementation,” he stated.
“We are collaborating closely with the Ministry of Energy to ensure these strategies are put into place, enabling ECG to collect more revenue, which will reduce or eliminate the burden on the government budget for covering these shortfalls,” Dr. Adam added.
Planned interventions include a recent US$260 million agreement with the World Bank to procure around one million smart meters, aimed at expanding customer reach and enhancing revenue collection.
Additionally, the government will ensure effective and transparent execution of the Cash Waterfall Mechanism and conduct a comprehensive sector audit to rectify the challenges facing the energy sector.
Dr. Adam highlighted that the savings generated from these initiatives to reduce the government’s financial commitments to ECG would be redirected to critical areas such as education, health, and road infrastructure.
“If ECG improves its collection efficiency and those who consume power without paying start settling their bills, the company will be better positioned to pay everyone in the value chain what they are owed,” he emphasized.
In an exclusive interview with the GNA at the IMF/WBG Annual Meetings, Ben Boakye, Executive Director of ACEP, advocated for a bipartisan and multi-stakeholder approach to resolving issues in the energy sector, particularly the inefficiencies of ECG.
“Currently, ECG is channeling over 50% of its revenue into debt, resulting in significant under-recoveries that impact Ghana’s budget, given that the government guarantees many power plants,” he noted.
He urged the government to engage the private sector, including second-tier pension fund managers, to raise sufficient funds for investment and ensure better returns for paying value chain players.
“We need to set aside politics and manage ECG as a business, allowing private sector involvement to inject capital and ensure timely bill payments,” he concluded.
