Energy analyst Prosper Smith Boahene of the Institute for Energy Security (IES) has urged the government to prioritise sustainable financing for the energy sector in the 2027 Budget, warning that its growing financial obligations could undermine electricity supply and investment if left unresolved.
Speaking in an interview ahead of the budget presentation, he identified the projected US$1.1 billion financial shortfall for 2026, outstanding payments to power producers and fuel suppliers, and the need to sustain local gas production as critical issues. He argued that government support must strengthen the electricity value chain without crowding out investment in other energy priorities.
“What the IES and, I believe, the majority of well-meaning Ghanaians are looking forward to is how sustainably the government can manage the recurring financial burden in the energy sector.”
Energy analyst Prosper Smith Boahene of the Institute for Energy Security (IES)
Boahene explained that the projected financial shortfall had declined from US$1.4 billion in 2025 to US$1.1 billion in 2026, while sector payables fell from US$2.1 billion to about US$1.7 billion over the same period.
He attributed part of the improvement to government payments made in 2025, including US$393 million to Independent Power Producers (IPPs) for energy supplied and capacity charges, as well as US$480 million to fuel suppliers.
However, he stressed that the central question for the 2027 Budget was whether the government could maintain the interventions without creating another cycle of accumulated debt.
Boahene cautioned that delays in settling obligations to IPPs, fuel suppliers and other service providers could affect the reliability and efficiency of the electricity market.
Cedi gains provide relief to electricity companies
The analyst also linked some of the sector’s recent financial improvement to the cedi’s appreciation against the US dollar, which has reduced the local currency cost of foreign currency obligations.
He cited the Electricity Company of Ghana’s (ECG) financial performance, noting that its after-tax loss had fallen from GH¢805 million to about GH¢2.5 million. He attributed a significant part of that recovery to the cedi’s performance.
However, he maintained that currency gains alone could not provide a lasting solution. The government must manage the projected shortfall, settle outstanding obligations and sustain reforms that allow the electricity value chain to finance its operations.
“The ultimate goal should be to ensure that the electricity value chain can finance itself at some point,”
Energy analyst Prosper Smith Boahene of the Institute for Energy Security (IES)
He warned that repeated government subsidies and financial interventions could divert resources from other priorities, including renewable energy, upstream activities and measures to increase domestic gas production.
Local gas production reduces fuel import pressure
Boahene welcomed the increase in local gas production to about 400 million standard cubic feet per day, although he noted that Ghana requires approximately 620 million standard cubic feet daily to support its energy production.
He also pointed to a reduction in light crude oil imports for thermal power generation, from about six cargoes to two. Since light crude oil costs approximately ten times more than gas, he described the reduced reliance on imported liquid fuel as an important development for the sector.
He nevertheless urged the government to facilitate completion of the second gas processing plant, which the IES has consistently identified as a priority.
Boahene argued that expanding domestic gas processing would improve the country’s ability to supply fuel for power generation and could influence both liquefied petroleum gas prices and electricity tariffs.
“If we are able to produce enough gas locally to power our plants independently, we will not need to have extensive discussions about tariff increases.”
Energy analyst Prosper Smith Boahene of the Institute for Energy Security (IES)
One-cedi levy cannot close the funding gap
The analyst also assessed the one-cedi levy imposed on every litre of fuel to help address energy sector debt and procure fuel for power generation. He disclosed that the levy had raised about GH¢8.8 billion.
However, he cautioned against treating the revenue as sufficient to meet the sector’s obligations, particularly when the projected 2026 financial shortfall remains at US$1.1 billion.
He acknowledged that increased domestic gas production and lower liquid fuel imports had reduced some of the urgency that accompanied the levy’s introduction, creating additional fiscal room for the government.
He maintained that reducing dependence on expensive fuel imports and recurring payments to external suppliers could free resources for renewable energy and other investments. The 2027 Budget must therefore demonstrate how government will contain the sector’s debt while building a more self-sustaining electricity market over time.
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