IMF warns Ghana energy debt progress is not enough to secure sector’s future

The International Monetary Fund (IMF) has warned Ghana that significant problems remain in its energy sector, despite a reduction in the sector’s financial shortfall and a fall in unpaid obligations to independent power producers and fuel suppliers.

The Fund said Ghana had made progress in reducing energy-related debt, but cautioned that the sector had yet to move from being a source of fiscal risk to becoming a driver of inclusive economic growth.

Its assessment estimates that the energy sector shortfall will remain substantial, at US$1.1bn in 2026. The gap reflects continued high losses in electricity collection and distribution, as well as expensive generation agreements containing capacity charges and “take-or-pay” clauses.

“Legacy debt remains large and its gradual clearance will take time and significant fiscal support. Institutional gaps (e.g., uneven enforcement of tariff adjustments and CWM [Cash Water Mechanism] guidelines) persist, leaving the sector prone to slippages, especially during electoral periods”.

The energy sector shortfall – the difference between its revenues and costs – fell to US$1.4bn, equivalent to 1.2% of Gross Domestic Product, in 2025. That was down from US$1.6bn, or 1.4% of GDP, in 2024.

The IMF attributed the improvement to several developments across the sector. These included tariff adjustments, better revenue collection by the Electricity Company of Ghana (ECG), increased payments to energy suppliers through the Cash Waterfall Mechanism, an appreciation of the cedi and lower use of liquid fuel in the electricity generation mix.

The Ministry of Finance also paid about US$2bn to independent power producers (IPPs) and fuel suppliers. Those payments included the replenishment of the World Bank-guaranteed letter of credit supporting gas supplies from the Sankofa field.

The government additionally secured savings by renegotiating agreements with Independent Power Producers, including Power Purchase Agreements (PPAs), as well as arrangements linked to legacy debt.

Those measures helped reduce the stock of net payables owed to IPPs and fuel suppliers. The amount stood at US$1.7bn at the end of March 2026, compared with US$2.1bn at the end of 2024.

However, the IMF said the reduction in outstanding payments should not obscure the wider pressures affecting Ghana’s energy finances. It said the continued size of the projected shortfall showed that the sector remained exposed to structural weaknesses, including collection and distribution losses and costly contractual obligations.

The Fund also pointed to institutional shortcomings, particularly inconsistent enforcement of tariff adjustments and Cash Water Mechanism guidelines. It warned that these weaknesses could leave the sector vulnerable to financial slippages, especially during electoral periods.

While Ghana’s recent measures have reduced the burden of unpaid obligations and narrowed the gap between energy revenues and costs, the IMF said clearing the remaining legacy debt would require time and significant fiscal support.