Ghana Moves to Reform Energy Sector Through Competitive Power Procurement

Finance Minister Dr. Cassiel Ato Forson has announced significant steps to address Ghana’s energy sector challenges, including submitting a Legislative Instrument to Parliament that would mandate competitive procurement for power plants.

The move comes as the government seeks to tackle the sector’s $2 billion financial deficit that is currently being passed on to consumers through high electricity tariffs.

Speaking at the IMF/World Bank Spring Meetings in Washington, Dr. Forson emphasized the urgency of reforms across the entire energy value chain. “ECG alone could reduce the sector’s shortfall by 50% if it addresses its inefficiencies,” he stated, highlighting how distribution problems are disproportionately affecting ordinary Ghanaians. The proposed legislation forms part of broader measures that include cabinet-approved private sector participation in the energy sector.

The reform push coincides with Ghana’s recent achievement of a staff-level agreement with the IMF, paving the way for $370 million in funding despite previous unmet program targets. This development signals international confidence in the new administration’s economic strategy, particularly its rapid response to inherited fiscal challenges including a substantial primary deficit from unpaid obligations in 2024.

Energy sector experts note that Ghana’s approach mirrors successful reforms in other emerging markets, where competitive procurement and private sector involvement have helped stabilize power sectors. However, the scale of Ghana’s $2 billion energy sector deficit presents particular urgency. The government’s ability to implement these reforms efficiently will be crucial for both economic stability and maintaining consumer confidence in the face of rising energy costs.

As Parliament considers the new legislation, observers will be watching to see how quickly these transparency measures can translate into tangible improvements for Ghana’s energy sector and its electricity consumers. The outcome could have significant implications for the country’s broader economic recovery efforts and its standing with international financial institutions.