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Home Headlines Ghana’s Energy Sector Debt Surpasses US$3 Billion Amid Calls for Reform

Ghana’s Energy Sector Debt Surpasses US$3 Billion Amid Calls for Reform

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John Abdulai Jinapor
John Abdulai Jinapor

Ghana’s energy sector debt has surpassed US$3 billion, a significant rise from the approximately US$2 billion recorded during the administration of former President John Dramani Mahama, according to John Abdulai Jinapor, the country’s Minister of Energy-designate.

The debt trajectory was outlined in a document titled ‘Summary of Energy Sector Debt and Lenders,’ which was presented during Mr. Jinapor’s vetting before parliament’s Appointments Committee.

Mr. Jinapor revealed that in August 2017, the Energy Sector Levies Act (ESLA) PLC conducted a full audit of the energy sector’s debt, which confirmed a total liability of US$2.1 billion as the debt level when the National Democratic Congress (NDC) government transitioned out of office. The minister strongly disputed claims suggesting the debt stood at US$5 billion at the time. He explained that during the 2024 transition of power, reconciliations placed the debt at US$2.5 billion as of September 30, 2024.

According to Mr. Jinapor, the current debt figure, which has risen to slightly over US$3 billion, is supported by data from the Ministry of Energy, the Energy Commission, and the Electricity Company of Ghana (ECG). He explained that a significant portion of the debt stems from unpaid bills for electricity consumed. “A chunk of it is power sold, delivered, and revenue not collected,” he noted, highlighting that this issue of non-payment for electricity supplied has been a major factor in the sector’s growing financial burden.

In addressing the ballooning debt, Mr. Jinapor pointed to the Energy Sector Levies Act (ESLA), which has generated approximately GH₵45 billion. This fund has been used to clear part of the debt, including interest payments amounting to GH₵9.4 billion. However, despite these efforts, the sector remains under significant financial strain.

The escalating energy sector debt has long been a critical challenge, placing immense pressure on state-owned utilities and posing a potential threat to Ghana’s economic stability. To address this growing issue, Mr. Jinapor outlined his vision to prioritize revenue collection and improve operational efficiency in the sector. He specifically highlighted the need for increased private-sector participation, particularly in areas such as billing and revenue collection for the Electricity Company of Ghana (ECG).

Private sector involvement in the distribution level, Mr. Jinapor argued, is essential for strengthening efficiency, improving collection rates, and reducing revenue losses. This approach, he noted, was a process he had previously spearheaded and continues to believe is crucial to tackling the ongoing financial challenges faced by Ghana’s energy sector.

The situation underscores the need for comprehensive reforms and more effective financial management strategies in Ghana’s energy sector. The rising debt is not only a major concern for state utilities but also a broader issue impacting the country’s fiscal health and long-term economic stability. Mr. Jinapor’s calls for greater private sector engagement could serve as a pivotal step towards enhancing revenue collection and addressing the sector’s persistent debt burden.

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