The International Monetary Fund (IMF) is throwing its support behind Ghana’s move to resume quarterly electricity tariff adjustments, describing it as a crucial step to address the country’s energy sector challenges.
Ghana’s energy sector is saddled with huge debt levels emanating from legacy debts and the debts owed to the Independent Power Producers (IPPs). The situation is taking a huge toll on the efficiency of the sector and straining the government’s fiscal operations.
As part of structural reforms to save the sector, the IMF Mission Chief to Ghana, Stephane Roudet, says the quarterly tariff adjustments is a step in the right direction.
In his remarks after concluding the fourth staff-level review, the Mission Chief argued that the quarterly review is critical in addressing the sector’s fiscal ‘bleeding.’
“The resumption of quarterly electricity tariff adjustments, combined with structural reforms, will help reduce the energy sector shortfall and stop the accumulation of new arrears,” Roudet noted in his remarks, signaling strong support from the Fund for the government’s bold economic recalibrations.
The IMF’s endorsement of a consistent and predictable tariff regime is, therefore, a nod to long-term sustainability over populist resistance.
The Public Utility Regulatory Commission (PURC) recently announced an upward adjustment in utility tariffs, citing exchange rate and inflation concerns as well as increasing operational expenses.
However, business groups such as GNCCI and AGI are baring their teeth at the PURC, warning that they are going to pass on additional costs to consumers.
This threatens inflationary pressures and could derail the inflation target for the 2025 fiscal year. With the IMF now backing this quarterly review and businesses vowing to pass the cost to consumers, there is a threat to the cost of living in the country.
However, amid the concerns of inflationary tendencies is the need to save the country’s energy sector, which is grappling with debts. How the government navigates and draws the line amid the two competing interests is very crucial.
In a quite a similar endorsement, the Bretton Woods institution backed the Bank of Ghana’s recent hike in monetary policy rate, indicating that these measures are critical to taming inflation, particularly in the face of rising global fuel and food prices. The Fund views this move as vital in sustaining macroeconomic stability and keeping inflation on a downward path.
