The International Monetary Fund (IMF) has given its backing for the privatization of the Electricity Company of Ghana (ECG).
IMF’s endorsement of ECG privatization came in its
July report on the fourth review of the Ghana’s US$3 billion-three-year Extended Credit Facility (ECF) arrangement, which identified the energy sector as a major source of fiscal risk.
ECG is currently a state-owned electricity distributor in Ghana. But the IMF believes allowing private sector participation is key.
In the view of the IMF, private sector participation would attract the much-needed investment and technical expertise to address Ghana’s legacy energy sector debts, making the energy sector financially sustainable.
ECG is responsible for distributing electricity in the southern part of Ghana, covering six administrative regions: Greater Accra, Eastern, Volta, Ashanti, Western and Central.
IMF says in the report that in the absence of any policy action, the annual energy sector shortfall is estimated to reach US$2.2 billion in 2025.
That reflected ECG’s large commercial and technical losses and slow electricity tariff adjustment in the face of exchange rate fluctuations and higher power generation costs, notably due to reliance on costly liquid fuels, the IMF observed.
“Staff welcomes the cabinet decision to open the electricity company’s operations to the private sector, and the efforts made towards the energy sector’s financial sustainability -including resuming the quarterly electricity tariff increases,” the Fund stated in its appraisal on the ECF programme.
The IMF observed progress in reducing the energy sector challenges including the 14.75 per cent increase in electricity tariffs in April 2025 by the Public Utilities Regulatory Commission (PURC) and compliance improvement with the Cash Waterfall Mechanism somewhat in 2025.
Nonetheless, the report indicated that “some IPPs received less than expected, as fuel payments and the addition of an IPP diluted Cash Waterfall Mechanism distributions.”
There were significant deviations between ECG’s validated and declared collections (GHS5.3 billion) and between CWM allocations and actual payments (GHS3.9 billion), the report noted.
To reduce the energy sector shortfall in the short term and enhance eciency, the Bretton Woods institution recommended a full and consistent implementation of the Cash Waterfall Mechanism
That implies the country ensuring regular payments to Independent Power Producers (IPPs) and fuel suppliers, addressing legacy arrears, and improving transparency, governance and accountability.
The IMF urged the Government to accelerate the implementation of the Energy Sector Recovery Programme measures, including conducting a multi-year tariff assessment to reflect changes in the costs of energy production by end-September 2025, enhance revenue collection and limit arrears accumulation.
In an earlier interview with the Ghana News Agency, Nana Amoasi VII, the Executive Director, Institute for Energy Security, said privatisation could bring in expertise, investment, and efficiency improvements that are needed to address infrastructure challenges and improve service delivery in the power sector.
Referring to the 2019 failed agreement with Power Distribution Services (PDS), he called for a well-designed, transparent, and best practices to avoid the pitfalls experienced in the past deal.
The failure of PDS to achieve certain pre-conditions led to the country missing some US$190 million in investment under the second tranche of the Millennium Challenge Corporation (MCC) power compact.
Ms Alice Albright, Chief Executive Officer of MCC, on Thursday, May 9, 2024, stated that the Corporation had no immediate plans, but remained opened to working with Ghana for long-term sustainability of related infrastructure and financial recovery in the energy sector.
Source: Africa Publicity
