Ghana's energy sector lost $1.4 billion in 2025 despite 40% electricity tariff hike – IERPP
Ghana’s energy sector recorded a financial shortfall of US$1.4 billion in 2025, equivalent to 1.2 percent of Gross Domestic Product (GDP), despite consumers absorbing cumulative electricity tariff increases of about 40 percent since March 2025.
The figures, according to the Institute of Economic Research and Public Policy (IERPP), are contained in the International Monetary Fund’s (IMF) July 2026 Selected Issues paper on Ghana.
IERPP said the data raise serious questions about whether higher electricity tariffs are translating into meaningful improvements in the financial and operational performance of the energy sector.
The institute is therefore demanding greater accountability from government over how additional revenue generated from higher electricity tariffs is being utilised.
It has posed a fundamental question: If households and businesses are paying significantly more for electricity, where is the additional money going?
Energy sector shortfall sees marginal improvement
IERPP’s review of the IMF report shows that the energy sector’s financial shortfall declined only marginally from US$1.6 billion, representing 1.4 percent of GDP, in 2024 to US$1.4 billion, or 1.2 percent of GDP, in 2025.
The institute cautioned against interpreting the reduction as evidence of significant structural reforms within the sector.
According to IERPP, the IMF attributed much of the improvement to better macroeconomic conditions and a stronger cedi rather than substantial gains in operational efficiency or revenue mobilisation.
For the institute, the distinction is significant.
“In plain terms: a favourable exchange rate bailed the sector out, not government reform,” IERPP said.
It argued that the figures indicate that the fundamental weaknesses affecting Ghana’s electricity sector remain largely unresolved.
Power producers, fuel suppliers owed US$1.7bn
The sector continues to face significant financial pressures, with outstanding liabilities to power producers and fuel suppliers estimated at about US$1.7 billion, equivalent to 1.5 percent of GDP, at the end of 2025.
The outstanding obligations reportedly peaked at approximately US$2.2 billion, or 1.9 percent of GDP, earlier in the year.
IERPP said the continued accumulation of liabilities raises concerns about the sustainability of the sector’s financial model, particularly at a time when consumers have already been subjected to substantial tariff increases.
Distribution losses remain at 27%
Another major concern highlighted by IERPP is the persistence of electricity distribution losses.
The institute said distribution losses remained at approximately 27 percent, meaning a significant proportion of electricity supplied does not generate corresponding revenue for the sector.
According to IERPP, the level has remained broadly unchanged for several years despite various interventions, including World Bank-backed smart metering and billing upgrades.
It said reducing distribution losses must be a central component of any credible strategy to restore the financial health of Ghana’s energy sector.
Government agencies responsible for 16% of arrears
IERPP also raised concerns about unpaid electricity bills owed by government institutions.
The IMF report indicates that unpaid electricity bills from Ministries, Departments and Agencies (MDAs) accounted for approximately 16 percent of total sector arrears at the end of 2025.
IERPP said the figure shows that government itself accounts for a significant proportion of outstanding electricity bills while simultaneously requiring households and businesses to pay higher tariffs.
The institute described the situation as a problem largely within government’s direct control rather than one driven by external market conditions.
IERPP questions pace of energy sector reforms
Although IERPP acknowledged that some of the challenges facing the energy sector were inherited, it argued that the current National Democratic Congress (NDC) administration had the whole of 2025 to begin addressing the sector’s structural weaknesses.
The institute said government instead relied heavily on increased electricity tariffs, while reforms aimed at reducing distribution losses, improving revenue collection and increasing private-sector participation progressed at a slower pace.
IERPP also cited the IMF report’s indication that the transaction adviser required to facilitate private-sector participation in electricity distribution had not yet been appointed at the time of the report.
While a framework for private-sector participation had been adopted, the institute said there was limited evidence of its implementation on the ground.
Three structural problems continue to undermine sector
IERPP said the IMF’s assessment points to three interconnected challenges affecting the financial sustainability of Ghana’s electricity sector: tariffs that do not adequately cover sector costs, high distribution losses and incomplete collection of electricity bills.
The institute argued that increasing tariffs addresses only one of these challenges.
Without simultaneous efforts to reduce distribution losses and improve bill collection, IERPP warned that further tariff increases could simply channel more money into a system that continues to lose substantial revenue.
It said this risks creating a cycle in which consumers are repeatedly asked to pay more without seeing corresponding improvements in efficiency, service delivery and financial sustainability.
IERPP demands action from government
IERPP said government must move beyond tariff adjustments and implement comprehensive reforms to address the underlying financial and operational weaknesses in the energy sector.
The institute is expected to push for measures aimed at improving revenue collection, reducing distribution losses, enforcing payment discipline among government institutions and accelerating private-sector participation in electricity distribution.
It maintained that restoring the sector’s financial health will require structural reforms and greater transparency rather than continued reliance on consumers to bridge the financing gap.