Ghana’s energy sector is in a serious crisis, and the numbers are staggering as under-recoveries are now costing the nation the equivalent of 2% of the country’s Gross Domestic Product (GDP).
Under-recovery in the energy sector, which is the difference between the actual cost of power production and what is paid by consumers, is also nearly four times Ghana’s annual capital investment in infrastructure.
This alarming fiscal imbalance in the sector was the focus of a high-level stakeholders’ dialogue held in Accra. The dialogue was convened by the Africa Centre for Energy Policy (ACEP), in collaboration with the Ministry of Energy and Green Transition and the Open Society Foundations (OSF).
The inefficiencies and structural problems fueling these under-recoveries pose a serious threat to Ghana’s economic stability and development agenda. While the country continues to borrow to build roads, schools, and hospitals, it is simultaneously bleeding money to subsidize a power system many consider unsustainable.
This staggering crisis, the stakeholders agreed, calls for urgent, bold and lasting reforms.
In a joint statement released after the dialogue by ACEP, Open Society Foundations, and the Ministry of Energy, the groups indicated that Ghana cannot continue investing more in covering energy sector losses than we do in infrastructure that improves livelihoods.
“The dialogue acknowledged that inefficiencies and structural issues in the energy sector continue to impose a significant fiscal burden on the country, with under-recoveries estimated at about 2 percent of GDP, equivalent to four times the country’s annual capital investment in infrastructure,” the statement read.
It added that, “this reality underscores the urgency for lasting solutions to ensure the sector’s viability and its contribution to national development.”
The stakeholders also acknowledged the government’s ongoing efforts, but called for immediate and systemic interventions.
Among the key proposals were the renegotiation of Independent Power Producer (IPP) contracts, expanded private sector participation in electricity distribution, and stronger procurement efficiency across energy institutions.
Importantly, the meeting didn’t just focus on plugging financial holes, but participants also emphasized the opportunity to use this crisis to catalyze economic transformation. Diversifying energy sources, speeding up green transition initiatives, and embedding gender equity and climate justice into policy decisions were highlighted as strategic paths forward.
All participants maintained that with billions of cedis being drained each year due to inefficiencies, the cost of inaction is simply too high. Ghana’s energy future and its economic development depend on immediate, practical solutions that put the sector on a path to sustainability.
