Switching Gears: Protecting Ghana’s Economic Sustainability in the Face of Power Sector Risks

The power sector is heavy on the agenda of the IMF to redirect Ghana to the path of fiscal sustainability. To that extent, the Fund is hopeful that the $3 billion Extended Credit Facility (ECF) and the accompanying fiscal consolidation pledges of the government will deliver for the power sector what the government and other Multilateral agencies, including the World Bank, the African Development Bank and other development partners, particularly the US government, have been unsuccessful to deliver for the past decade. That certainly is a hard sell, and analysts remain cautious in believing that the IMF can deliver this miracle, undermined by a lack of political will, inefficient decisions, lack of accountability and deficit of context-appropriate solutions to the problems.

Summary of issues

  1. The power sector remains a major threat to Ghana’s economic sustainability.
  2. The IMF programme recognises the reform of the sector as key to economic recovery.
  3. Tariffs have increased by about 100% in the past nine months, but liquidity has worsened within the same period, raising concerns about revenue accounting by ECG, and the impact of the adjustments.
  4. The Cash Waterfall Mechanism recorded its poorest performance in March and April 2023, meeting only 11% of the revenue requirement. This is because of ECG’s discretionary spending and poor accounting.
  5. At the same time, more poor decisions are being made to further threaten the sustainability of the power sector, requiring a seismic shift in the governance of the sector.

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