By Issah Olegor
The struggling energy sector has once again come under intense scrutiny after the International Monetary Fund (IMF) warned that urgent reforms are needed to address deepening operational and financial challenges confronting the Electricity Company of Ghana (ECG) and the broader power sector.
The concerns were contained in the IMF’s latest 2026 Article IV Consultation and staff-level agreement with Ghana on the sixth review under the Extended Credit Facility (ECF) programme, as well as a new 36-month Policy Coordination Instrument (PCI) arrangement that will keep Ghana under IMF policy supervision for the next three years.
According to the IMF, one of the immediate priorities for the economy is tackling persistent distribution and collection losses at ECG, which continue to weaken the financial health of the country’s energy sector and threaten broader economic stability.
The IMF’s latest warning comes at a time when the energy sector remains burdened by mounting debts, unreliable revenue collection systems, power generation payment arrears, and recurring concerns over the possibility of another power crisis similar to the “dumsor” era that severely affected businesses and households years ago.
For more than a decade, the power sector has struggled with financial instability despite several government interventions and reform programmes aimed at stabilising electricity generation, transmission, and distribution.
The sector’s difficulties worsened during the prolonged power crisis between 2012 and 2016, when erratic electricity supply crippled businesses, disrupted industrial production, and became one of the country’s biggest political and economic challenges.
Following the crisis, successive governments entered into several emergency power agreements with Independent Power Producers (IPPs) to stabilise electricity generation.
However, many of those agreements later became controversial due to high-capacity charges and long-term financial obligations imposed on the state.
Over the years, concerns have continued to grow about ECG’s inability to recover enough revenue to meet its obligations to power producers, fuel suppliers, and other stakeholders within the energy value chain.
Technical losses, illegal connections, power theft, weak billing systems, and inefficiencies in revenue mobilisation have all contributed to the worsening financial situation at ECG.
The situation has resulted in what energy experts often describe as a “cash waterfall crisis,” where inadequate revenue collection by ECG affects the entire power supply chain, leaving state institutions and private power producers struggling to operate effectively.
In recent years, several Independent Power Producers repeatedly threatened to shut down plants over unpaid debts owed by ECG and the government, raising fears of renewed nationwide power outages.
The sector has also faced controversy surrounding attempts to privatise or concession ECG operations.
Under the previous Akufo-Addo administration, the government introduced the Power Distribution Services (PDS) concession agreement as part of efforts linked to the United States Millennium Challenge Corporation compact.
However, the agreement later collapsed amid allegations of fraud and irregularities relating to demand guarantees and insurance documentation, forcing the government to terminate the concession arrangement.
The collapse of the PDS deal triggered political disputes between the National Democratic Congress (NDC) and the New Patriotic Party (NPP), with both parties trading blame over the failures within the energy sector.
Since returning to office, the Mahama administration has faced increasing pressure over rising energy sector debts and concerns about the sustainability of the current electricity distribution system.
Although the government has insisted that measures are being implemented to improve efficiency and stabilise the sector, labour unions, industry players and consumers continue to raise concerns about operational inefficiencies, rising costs, and the growing financial burden on the state.
The IMF’s latest assessment now places renewed focus on ECG’s performance as a critical factor in the broader economic recovery programme.
According to the Fund, addressing distribution and collection losses at ECG remains essential to restoring financial sustainability within the energy sector and preventing additional fiscal pressures on the government.
The IMF warning also comes amid growing public concern over reports of increasing debts owed to Independent Power Producers, fuel supply challenges, and fears that persistent inefficiencies could eventually lead to renewed electricity instability if left unresolved.
Energy analysts have repeatedly warned that unless major structural reforms are undertaken, the energy sector could continue to drain public finances and undermine gains achieved under the country’s IMF-supported economic recovery programme.
Apart from ECG-related concerns, the IMF also highlighted vulnerabilities in other sectors of the economy, including the Bank of Ghana’s exposure to risks linked to the Domestic Gold Purchase Programme and financial sustainability challenges facing the cocoa sector.
The IMF further cautioned Ghana against fiscal indiscipline, rising debt accumulation, and policy reversals, warning that maintaining macroeconomic stability after the ECF programme would require consistent reforms and strict financial discipline.
Meanwhile, the government has announced that although Ghana has officially exited the financing phase of the IMF bailout programme, the country will continue engaging the Fund under a three-year Policy Coordination Instrument arrangement focused on technical assistance, policy monitoring, and reform implementation.
The government believes the continued IMF engagement will strengthen investor confidence and help Ghana achieve long-term economic stability.
However, the Fund’s latest warning about ECG and the energy sector is expected to intensify debate over whether the government can successfully resolve the long-standing structural problems that have plagued the power industry for years without imposing additional financial burdens on consumers and taxpayers.
