The Policy Lead for Petroleum and Conventional Energy at the Africa Centre for Energy Policy (ACEP) has warned about the looming economic threat posed by the country’s energy sector debt.
He emphasized that the energy sector debt has been a known issue for years yet little has been done to address it and cautioned the situation could put Ghana into yet another debt crisis in the not-too-long distance future.
Kodzo Yaotse issued the warning at a one-day capacity-building workshop for the media aimed at enhancing advocacy for financial sustainability in Ghana’s power sector.
The event focused on unravelling the complex issues surrounding Ghana’s power sector debt driven largely by inefficiencies at the Electricity Company of Ghana (ECG) and the urgent need for reforms.
“We have been shouting on the rooftops that the energy sector is going to push us into a debt crisis, but nobody paid attention. Now that has become real, it has become material, and it continues to remain a big threat to our economic sustainability,” he stressed.
According to Yaotse, the International Monetary Fund (IMF) bailout program has brought the energy sector’s financial shortfalls into sharp focus, which were previously handled outside the government’s fiscal framework.
However, under the current IMF program, energy sector shortfalls have been integrated into the national budget, which has highlighted its debilitating effect on the economy.
He said, “Between 2023 and 2026, we are programmed to pay some $97 billion in shortfalls,” Yaotse explained.
This, he noted, adds a significant burden to the national budget, potentially diverting funds away from critical sectors.
The ACEP energy analyst stressed that the energy sector’s inefficiencies have cost Ghana dearly and shared sobering statistics, revealing that from 2019 to 2023, the country spent approximately $8.25 billion to cover losses in the power sector.
“For the past four, five, six years, we’ve been spending about $1.5 billion annually to recover losses in the power sector,” he said.
These massive expenditures, Yaotse added, starve other essential sectors of funding
“If you put together the capital expenditure budgets of agriculture, fisheries, roads, education, gender and social protection, and health, the amount we spend for energy sector shortfalls in a year will pay for twice the capital expenditure of these sectors combined,” Yaotse explained.
He illustrated further how the wasted funds could instead have been used to construct hospitals or other social infrastructure, such as the Agenda 111 initiative.
Kodzo Yaotse pointed to several attempts to resolve the power sector’s debt problem, including interventions from the World Bank and the African Development Bank (AfDB).
Despite these efforts, inefficiencies persist, costing the country billions in lost revenue and increased debt.
He said, “The Millennium Challenge Corporation (MCC) Compact and the concession process both failed due to inefficiencies, and we have not seen any significant improvement in regulatory efficiency despite the support of the AfDB,” he said.
Yaotse posed a critical question to the audience: “Why do we know the problem, know the extent of the problem, know how to solve the problem, but the problem still exists?”
He underscored the need for urgent and decisive action to reduce operational inefficiencies in Ghana’s energy sector to prevent further financial haemorrhaging and protect the nation’s economic future.