Ghana’s energy and cocoa sectors continue to be major hurdles in the country’s ongoing programme with the International Monetary Fund (IMF), despite overall progress. The IMF has carried out three reviews of Ghana’s $3 billion, 36-month Extended Credit Facility (ECF) programme and has acknowledged that the country’s performance has generally been satisfactory. Ghana has largely met all the targets set under the programme so far. However, both the energy and cocoa sectors have consistently been highlighted as problem areas.
In a press conference held earlier this year after the second review, the IMF and the Government of Ghana emphasized the need to focus more on these two sectors. The IMF reiterated this concern in the third review, noting that continued fiscal progress would depend on improved management of state-owned enterprises (SOEs) in these sectors.
Challenges in the Cocoa Sector
Ghana’s cocoa industry has been facing difficulties for several years. Cocoa production has dropped, and the Ghana Cocoa Board (COCOBOD), which regulates the sector, is struggling with massive debts. These financial troubles have led COCOBOD to default on its cocoa bills, creating further instability in the sector.
The government had planned to reduce costs within COCOBOD and cut back on the cocoa road projects to focus resources on completing ongoing works. However, the IMF’s assessment suggests that these measures have not been effectively implemented.
Government’s management of COCOBOD has also faced criticism for changes in oversight. In 2017, the New Patriotic Party (NPP) government shifted COCOBOD from the Ministry of Finance to the Ministry of Food and Agriculture. Some analysts argue that this move has been detrimental to the cocoa sector. As part of the IMF programme, the Ministry of Finance was instructed to extend its monitoring of COCOBOD, implying that placing it under the Ministry of Agriculture was not seen as the best decision.
Energy Sector Struggles
In the energy sector, the government has been tasked with reducing revenue shortfalls and addressing inefficiencies. The IMF also recommended an audit of the sector and improvements to the cash waterfall mechanism, a system designed to ensure that all players in the energy market are paid fairly. Additionally, the Public Utilities Regulatory Commission (PURC) was supposed to make the process of setting electricity tariffs more transparent and less prone to discretion.
However, raising electricity tariffs has been a sensitive issue in Ghana, with public opposition making it difficult for the government to implement necessary increases. Moreover, the failure to fully apply the cash waterfall mechanism has left state-owned energy companies, like the Electricity Company of Ghana (ECG), saddled with huge debts. As a result, the IMF’s view on the energy sector remains critical.
Future of the IMF Programme
Given that both the energy and cocoa sectors pose significant risks to Ghana’s IMF programme, the next government will need to prioritize resolving these issues. If these challenges are not adequately addressed, the government may have to renegotiate parts of the IMF agreement or seek concessions. Without progress in these key sectors, Ghana’s ability to meet its fiscal and economic goals under the programme could be compromised.
