Ghana’s electricity sector remains one of the biggest pressure points on the country’s public finances, with the Electricity Company of Ghana (ECG) at the centre of a structural problem involving revenue collection, tariff under-recovery, expensive power contracts and large investment requirements, according to a new International Monetary Fund technical assistance report on state-owned enterprises.
The report provides a sharper picture of why reforms in Ghana’s electricity sector cannot be treated simply as an operational issue at ECG.
The challenges extend across generation, transmission and distribution, linking the financial position of the utility directly to government finances, private power producers and the country’s ability to maintain and expand critical electricity infrastructure.
The IMF notes that electricity sector state-owned enterprises; including ECG, Ghana Grid Company (GRIDCo), Northern Electricity Distribution Company (NEDCo) and the Volta River Authority (VRA), continue to account for a substantial share of the losses weighing on Ghana’s wider SOE portfolio.
The findings are particularly significant because Ghana has achieved considerable progress in electricity access.
Reliable electricity access has risen from below 50% of the population in 2000 to close to 90%, placing the country ahead of the Sub-Saharan African and low-income country averages cited in the report.
Yet the financial architecture supporting that access remains fragile, creating a paradox in which Ghana has expanded electricity coverage considerably while the institutions responsible for delivering the service continue to generate significant fiscal risks.
ECG’s Losses Extend Beyond Distribution
The IMF’s assessment suggests that ECG’s financial difficulties should not be viewed solely through the lens of how much electricity the utility sells or how much revenue it collects.
The distribution company sits at the downstream end of a chain in which costs have accumulated from generation contracts, foreign-exchange exposure, tariffs and payment obligations.
The report identifies electricity utilities as the most significant drag on Ghana’s SOE portfolio. Although there has been some year-on-year improvement in ECG’s bottom line, the broader electricity SOEs continue to account for the majority of negative financial outcomes.
The IMF attributes this to a combination of operational inefficiencies, technical and commercial losses, tariffs that do not fully recover costs and arrears running through the energy value chain.
The scale becomes clearer when ECG is separated from the rest of the SOE sector.
In 2024, ECG alone accounted for 85% of aggregate SOE losses, equivalent to about 0.7% of GDP, according to the IMF’s analysis.
Ten major SOEs; including ECG, VRA, GNPC, Ghana National Gas Company, Bui Power Authority, NEDCo and GRIDCo, generated almost 80% of total SOE revenue but collectively recorded a net loss of GH¢8.8 billion, representing more than 90% of total SOE losses.
“ECG alone contributed 85 percent of the aggregated losses made by SOEs in 2024, equivalent to 0.7 percent of GDP.”
International Monetary Fund Technical Assistance Report
That figure makes ECG more than a utility-sector concern. Its financial performance has implications for Ghana’s fiscal position because government ultimately remains exposed to the obligations generated across the electricity value chain.
The Tariff Problem Is Only Part Of The Equation
One of the report’s most important observations concerns electricity tariffs.
The IMF finds that electricity tariffs have consistently been set below cost-recovery levels.
While such a structure may protect consumers from the full cost of electricity, it simultaneously reduces the resources available for maintaining and expanding distribution and transmission infrastructure.
The problem is compounded by the structure of Ghana’s Power Purchase Agreements.
The IMF points out that tariff calculations do not fully incorporate the cost of excess generation capacity, even though many PPAs operate under “take-or-pay” arrangements.
This means ECG can be required to pay for contracted power capacity even where that capacity is not fully utilised. IMF on Ghana’s SOEs.pdf
This creates a difficult policy triangle.
Consumers require affordable electricity. ECG needs sufficient revenue to operate and invest.
Meanwhile, generators must be paid under contractual arrangements, including obligations that can arise regardless of actual electricity demand.
If tariffs are kept below the level required to recover costs, the resulting gap does not disappear.
It is effectively transferred elsewhere in the system, often eventually becoming a government fiscal obligation.
The IMF therefore frames the problem as one of economic regulation and sector design rather than merely poor collection at ECG.
Foreign Exchange Adds Another Layer Of Risk
Ghana’s electricity-sector vulnerability is also closely connected to the foreign exchange market.
The IMF notes that energy SOEs carry extensive obligations under PPAs, many of which are denominated in US dollars and supported by government guarantees.
This exposes the companies, and ultimately the State, to exchange-rate and refinancing risks.
When the cedi depreciates, the domestic-currency value of dollar-linked obligations increases even when the underlying dollar obligation remains unchanged.
For ECG, this means that improving revenue collection alone cannot completely resolve the financial problem.
A utility can collect more from consumers while still facing substantial costs that are outside its direct control.
If those costs are dollar-linked while revenues are predominantly generated in cedis, currency movements can quickly erode operational improvements.
This is why Ghana’s energy-sector reforms increasingly have to be considered alongside broader macroeconomic policy.
Ghana Is Still Investing Heavily In Electricity
The financial pressure is occurring alongside significant infrastructure investment.
The IMF reports that the top ten infrastructure-related SOEs invested more than GH¢14 billion in physical assets in 2024, equivalent to about 1.2% of GDP.
The electricity sector accounted for GH¢8.75 billion, with ECG identified as the principal driver of that investment.
That finding adds another dimension to the ECG debate.
The utility is not simply consuming public resources. It is also responsible for a substantial share of infrastructure investment required to keep Ghana’s electricity system functioning and expand its capacity.
The challenge, therefore, is to ensure that investment in distribution infrastructure produces corresponding improvements in reliability, revenue mobilisation and commercial performance.
If investment continues without fixing the underlying revenue and tariff structure, Ghana risks creating a cycle in which more infrastructure generates more assets but not enough financial capacity to maintain them.
Reform Must Move Beyond Crisis Management
The IMF’s recommendations point towards a broader restructuring of how Ghana manages commercially important state-owned enterprises.
The Fund argues that Ghana should move from policy frameworks towards enforceable, performance-based practices.
It recommends merit-based processes for appointing SOE boards and executive management, a reduction in the number of active politicians and high-level officials serving on boards, and stronger implementation of corporate-governance requirements.
For the energy sector, the implication is straightforward: financial reform cannot be separated from institutional accountability.
The IMF also recommends clarifying and compensating government-funded policy mandates, including ECG’s tariff under-recovery.
That distinction matters because an electricity utility can be required to provide services or maintain prices for social and policy reasons that are not commercially viable.
When such obligations are not explicitly funded, they can appear as inefficiency or losses on the company’s balance sheet even when they originate from government policy.
“Clarifying and compensating QFA mandates, such as ECG’s tariff under-recovery would further align SOE incentives and help their boards focus on long-term value creation rather than ad-hoc crisis management.”
International Monetary Fund Technical Assistance Report
For Ghana, this may be one of the most important lessons in the report: ECG cannot be expected to solve a problem created across the electricity value chain by relying on collection improvements alone.
The utility needs stronger commercial discipline, but the generation contracts feeding into it, the tariffs governing its revenues, the regulatory framework determining allowable costs and the government’s treatment of policy obligations must also be addressed.
The ultimate test of Ghana’s electricity reforms will therefore not simply be whether ECG reports higher collections or smaller losses in a particular year.
It will be whether the sector can progressively reduce its dependence on government financing while maintaining reliable electricity, attracting investment and generating enough internal resources to renew the infrastructure on which the economy depends.
Ghana has already demonstrated that it can expand electricity access to levels close to 90%.
The next challenge is arguably more difficult: building an electricity system that can financially sustain that achievement.
And that puts ECG at the centre of a much larger national question, not simply who should run Ghana’s distribution network, but how the country intends to pay for the electricity system it has spent decades building.
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