The International Monetary Fund (IMF) has commended Ghana’s successful renegotiation of legacy arrears owed to Independent Power Producers (IPPs), describing the move as a “major turning point” for the country’s energy sector.
The development, according to the Fund, signals renewed investor confidence, improved financial discipline, and a crucial reset of the sector’s financial foundations.
In remarks to the media, IMF Resident Representative to Ghana, Dr. Adrian Alter, praised the government’s decision to engage and restructure outstanding debts owed to IPPs, calling it “an important milestone” in stabilising Ghana’s power industry.
“The government has renegotiated recently the legacy arrears with the IPPs and has taken steps to improve the revenues of the ECG and the cash waterfall mechanism.
“But this is not sufficient. More work has to be done to ensure the financial sustainability of the energy sector.”
Dr. Adrian Alter, IMF Resident Representative to Ghana
Reset for the Power Industry
For over a decade, Ghana’s energy sector had been plagued by mounting arrears, reaching over US$2.5 billion, owed largely to Independent Power Producers.
The backlog of unpaid invoices strained liquidity within the value chain, hampered fuel supply, and eroded investor confidence, with several private operators warning of potential plant shutdowns if payments did not improve.
Dr. Alter said the successful renegotiation of the debt in 2025 marked a “reset for the industry,” allowing both government and private investors to operate within a more stable financial framework.
“The renegotiation of the arrears, of the past arrears, which was conducted by the government this summer, is an important milestone. I would say that is a reset for the industry.”
Dr. Adrian Alter, IMF Resident Representative to Ghana
The IMF noted that the restructuring reduced Ghana’s outstanding debt to IPPs by 20 percent, lowering the figure from US$1.5 billion to US$1.2 billion, and extending repayment over four to five years.
This arrangement, the Fund said, provides the government with much-needed fiscal space to focus on reforms aimed at improving cost recovery and operational efficiency.
Strengthening Financial Management
Dr. Alter also commended improvements in the Electricity Company of Ghana’s (ECG) revenue performance, noting that 2025 had recorded substantial gains compared to previous years.
He attributed the turnaround to a combination of tariff adjustments, improved transparency, and enhanced collection systems that have helped plug revenue leakages.
The IMF highlighted the cash waterfall mechanism, a payment allocation system designed to ensure equitable distribution of revenue among stakeholders as one of the key reforms driving stability within the sector.
The mechanism, which had suffered implementation challenges in previous years, is now being executed more effectively, improving predictability and trust across the energy supply chain.
Dr. Alter described 2025 as a year of “payment regularity and transparency” for Ghana’s energy sector, a development that has helped rebuild confidence among private investors and financiers who had previously viewed the sector as risky.
While the IMF acknowledged Ghana’s progress, Dr. Alter cautioned that sustaining the momentum would require continued commitment to fiscal discipline and governance reforms.
He warned that any complacency could reverse the gains made in restoring investor trust and operational stability.
The IMF further urged the government to maintain focus on tariff reforms and efficiency improvements within generation, transmission, and distribution operations to ensure that revenues align with actual costs.
The restructuring of IPP arrears not only strengthens balance sheets across the sector but also signals to investors that Ghana is serious about financial discipline and long-term energy reform.
Restoring Investor Confidence
According to market observers, the government’s engagement with IPPs marks a significant shift from years of strained relations between state-owned utilities and private operators.
Previous cycles of delayed payments and opaque contract management had left several IPPs hesitant to expand or reinvest in the Ghanaian market.
Dr. Alter’s comments also align with the Fund’s broader goal of promoting fiscal and operational sustainability in Ghana’s public sector enterprises.
Under its Extended Credit Facility (ECF) programme, the IMF has consistently emphasised the need for reforms in state-owned entities like ECG and the Ghana Grid Company (GRIDCo) to enhance efficiency and reduce fiscal burdens on government finances.
Nonetheless, the IMF’s latest endorsement reflects growing confidence in Ghana’s reform trajectory and offers reassurance to international investors that the country’s energy sector is on the path toward greater transparency, predictability, and financial sustainability.
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