The energy sector debt in Ghana has surged to $3 billion, according to Energy Minister-designate Hon. John Abdulai Jinapor.
Speaking during his vetting before Parliament’s Appointments Committee on January 13, Hon. Jinapor highlighted the alarming rise in the sector’s liabilities, attributing the escalation to ineffective management and compounding interest on existing debts.
“As of 2017, the consolidated energy sector debt was $2.1 billion. This was validated by Parliament and reflected in public records,” Hon. Jinapor explained.
Citing a validated document from the Energy Sector Levies Act (ESLA) PLC’s audit, he clarified that this figure was calculated at an exchange rate of 4.4.
However, as of September 30, 2024, the debt had risen to $2.5 billion. Following a reconciliation meeting with the Ministry of Energy, the Energy Commission, and the Electricity Company of Ghana (ECG), the figure was confirmed to have further escalated to $3 billion.
The Energy Sector Levies Act (ESLA), introduced to address energy sector debts, has raised approximately GH₵45 billion over the years. While these funds have been used to service part of the principal and interest on the debt, they have proven insufficient to stem the rising liabilities.
“The levies have been helpful, but they are not enough to offset the growing financial burden in the sector,” Hon. Jinapor remarked.
The escalating debt, he warned, threatens the financial viability of key players in the energy sector, including power producers and distributors, and undermines the country’s energy security.
“We need to reform procurement systems at ECG to ensure that resources are directed toward critical areas, such as paying for power that has already been generated.”
Hon. John Abdulai Jinapor, Energy Minister-designate
The cash waterfall mechanism, designed to ensure equitable payments to Independent Power Producers (IPPs), has faced implementation challenges.
Hon. Jinapor pledged to enhance its effectiveness to build trust among stakeholders and prevent service disruptions.
The Minister-designate highlighted the need for a comprehensive strategy to manage the sector’s growing debt. This includes improving revenue collection, reducing technical and commercial losses, and restructuring existing liabilities to reduce interest payments.
Private Sector Involvement in ECG Operations
In addition to addressing the sector’s financial challenges, Hon. Jinapor underscored the importance of introducing private sector participation in the operations of the Electricity Company of Ghana (ECG).
This, he argued, would enhance efficiency, reduce technical and commercial losses, and improve power distribution.
“We believe there should be private sector participation.
“What we intend to do is form a seven-member committee chaired by technical experts, legal advisors, financial experts, industry players, and even a representative from the consumer side.”
Hon. John Abdulai Jinapor, Energy Minister-designate
The committee’s mandate will be to design a comprehensive framework based on global best practices.
This will include evaluating whether a concession model or full privatization would be most suitable for ECG.
To ensure public confidence in the process, Hon. Jinapor stressed the importance of transparency and avoiding political interference.
“We will stay off as politicians and let the committee develop a framework in a transparent, open, and frank manner.
“Once we get the buy-in of Ghanaians, we can set standards using a Request for Proposal (RFP) or competitive tender process.”
Hon. John Abdulai Jinapor, Energy Minister-designate
The Minister-designate made it clear that the government would not resort to sole-sourcing in engaging private sector players for ECG’s operations.
Instead, a competitive process with a strong emphasis on local content and Key Performance Indicators (KPIs) will be adopted to safeguard national interests.
“Our approach ensures a clear path forward, incorporating private sector expertise while protecting Ghana’s strategic energy assets,” he said
The challenges in Ghana’s energy sector are significant, but Hon. Jinapor expressed optimism that with the right policies and stakeholder collaboration, meaningful progress could be made.
“The rising debt and inefficiencies require bold and decisive action. We must work together to ensure a sustainable energy sector that benefits all Ghanaians.”
Hon. John Abdulai Jinapor, Energy Minister-designate
As Ghana’s energy sector debt hits $3 billion, the stakes are higher than ever. Energy Minister-designate John Jinapor’s proposed reforms—emphasizing private sector participation, governance improvements at ECG, and better debt management—offer a roadmap for stabilizing the sector and ensuring its long-term viability.
By prioritizing transparency, stakeholder engagement, and innovative solutions, Ghana has an opportunity to turn its energy challenges into a platform for sustainable growth and economic development.
For now, all eyes will be on the Ministry of Energy as it works to deliver on these promises and restore confidence in Ghana’s energy sector.
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