Ghana’s energy sector recorded financial losses of about US$1.4 billion in 2025, equivalent to 1.5 percent of the country’s Gross Domestic Product, as persistent tariff shortfalls, power losses and weak revenue collection continued to strain public finances, the International Monetary Fund (IMF) has said.
In its latest Selected Issues Paper, the Fund said the sector’s financial difficulties forced the government to provide about US$2 billion in bailouts in 2025, up from US$1.5 billion the previous year, to support energy companies and suppliers.
The IMF said the challenges have been driven by three major weaknesses: electricity tariffs that have not fully reflected costs, high technical and commercial losses within the distribution system, and poor collection of billed revenue.
“Shortfalls have led to an accumulation of payables to independent power producers (IPPs) and fuel suppliers,” the Fund said.
Outstanding payments to energy suppliers reached about US$2.2 billion in early 2025 before reducing to US$1.7 billion by the end of the year, according to the report.
The Electricity Company of Ghana’s (ECG) arrears also increased significantly, peaking at about US$3.5 billion in mid-2025 before easing to US$2.8 billion by year-end.
Three pressures driving the crisis
The IMF identified tariff gaps as one of the biggest contributors to the sector’s financial instability, noting that adjustments were suspended ahead of the 2024 general elections while production costs, particularly those linked to foreign exchange, continued to rise.
The Fund also cited persistent distribution losses, which stood at 27.1 percent in 2024, with losses in Northern Electricity Distribution Company (NEDCo) areas reaching 31.3 percent.
Revenue collection remains another challenge, with ECG collecting about 86 percent of billed electricity charges and retaining less for payments through the Cash Waterfall Mechanism.
The IMF warned that these weaknesses create a cycle where unpaid bills lead to arrears owed to power producers and fuel suppliers, forcing government intervention and increasing the risk of power disruptions.
“These are not just accounting problems,” the Fund said, warning that the financial weaknesses contribute to outages that affect households and businesses.
Early signs of impact
Despite the challenges, the IMF said reforms under Ghana’s economic recovery programme have started improving the sector’s position.
The Fund said quarterly tariff adjustments resumed in 2025 after a suspension before the elections, while compliance with the Cash
Waterfall Mechanism improved.
It also noted increased domestic gas supply following expanded processing capacity by Italian energy firm Eni in July 2025.
However, the IMF warned that previous reform delays came at a cost, pointing to what it described as “reform slippages in 2024” that contributed to rising government support for the sector.
Deeper reforms
The Fund has urged Ghana to maintain regular tariff adjustments, strengthen payment discipline and implement a credible plan to clear arrears owed to energy suppliers.
It also backed plans to introduce private sector participation in ECG’s distribution operations, describing the proposal as a partnership arrangement rather than privatization.
The IMF said long-term solutions require transparent tariff-setting, audited financial statements for state-owned energy companies and competitive procurement processes for future power projects.
“If implemented, a financially sustainable sector — characterized by a creditworthy off-taker, predictable tariff adjustments and disciplined procurement — will support investment and reduce reliance on costly emergency interventions,” the Fund said.
The IMF said fixing the energy sector will be critical to Ghana’s economic recovery and the government’s plans to expand economic activity under its 24-Hour Economy agenda.
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