Government payment cuts outweigh ECG revenue gains – IMF

The International Monetary Fund (IMF) has observed that reductions in direct government payments to power producers have outweighed improvements in revenue collection at the Electricity Company of Ghana (ECG), limiting the overall impact of recent operational gains.

In its latest programme review, the Fund noted that although ECG recorded a “remarkable surge” in operational performance, the central government’s scaled-back financial support overshadowed these gains.

According to the report, ECG paid a total of US$308 million to Independent Power Producers (IPPs) through the Cash Waterfall Mechanism in the first half of 2025—almost equalling the US$325 million paid throughout the entire 2024 financial year.

Despite this progress, the IMF said net payables to IPPs increased by US$71 million over the same period, pushing the total outstanding amount to about US$1.2 billion by the end of June 2025. The Fund attributed the rise to reduced direct government payments, which created a financing gap that ECG’s improved performance alone was unable to bridge.

The IMF added that the energy sector debt continued to grow despite the introduction of a fuel levy last year, which was intended to clear legacy debts, support fuel procurement and aid fiscal consolidation. While debts owed to fuel suppliers fell by US$124 million, they remained elevated at around US$830 million.

The report further indicated that ECG now covers about 48 per cent of its power bills, a significant improvement from 11 per cent in 2024. However, the government still had to absorb a funding shortfall of more than US$500 million in the first nine months of 2025 to meet legacy debt obligations and fuel costs.

To tackle the legacy debt challenge, the IMF disclosed that the government reached agreements with nine IPPs in the third quarter of 2025. The deals involved creditor haircuts ranging between 15 per cent and 30 per cent, as well as upfront payments amounting to US$300 million. Outstanding balances are expected to be settled between 2026 and 2029.

In addition, revised Power Purchase Agreements (PPAs) aimed at lowering future generation costs were approved by Parliament in November 2025. The government has also earmarked GH¢15 billion in the 2026 Budget to cover projected energy sector shortfalls alongside legacy debt payments.

While acknowledging that renegotiated PPAs and reduced dependence on costly liquid fuels have placed Ghana on a more positive trajectory, the IMF cautioned that further reforms are necessary to restore ECG’s financial sustainability and reduce ongoing fiscal risks.