Banking and financial analyst, Dr. Richmond Atuahene, has largely attributed the swift passage of Ghana’s new energy sector levy to a significant and unanticipated shortfall in the government’s revenue, caused largely by the recent appreciation of the cedi against the U.S. dollar.
Even though the concerns for the energy sector debt, Dr. Atuahene says, are justified, he believes the driving factor is the urgent need to shore up revenue since projections in the 2025 budget have been thrown off gear due to the cedi’s bold appreciation.
Parliament last week passed an amendment to the Energy Sector Levies Act, which introduced an additional ₵ 1 per litre levy in the petroleum price build-up. The amendment, interestingly, was passed under a certificate of urgency despite the option of including it in the mid-year budget review, which is just a month away.
Following the passage by parliament, although the minority staged a walkout, the President hurriedly assented to the bill to operationalize it.
But speaking in an interview with The High Street Journal, Dr. Atuahene revealed that the strengthening of the cedi, dropping from GHS17 to GHS10 per dollar over the past quarter, has sharply reduced revenue generated from import duties and taxes, which are pegged to foreign exchange values.
“If 15 cedis to the dollar was being used, and today we are talking about even an average of 12, then 3 cedis is off. So I’m not surprised they needed to shore up revenue, or else there would be a budget shortage,” he stated.
While the government’s narrative says the levy is tied to resolving Ghana’s longstanding energy sector legacy debt, Dr. Atuahene argues the true motivation lies in plugging a growing fiscal gap caused by the unexpected dip in import-based tax collections.
He explained that, “ I think the basis of the new levy is about the unexpected shortfall in revenue from imports because of the cedi appreciation. It used to be 15, today we are talking about 10, and this thing has been going on for almost a whole quarter. It means that there is a revenue shortfall, so they need to find a means of shoring it up before they can even talk about the energy.”
“Combining the unanticipated revenue shortage and the way the debt is going, they needed to do something to pay the debt. It’s not only the energy but also the shortfall in import taxes and duties,” he added.
While acknowledging the need for addressing the revenue shortfall and the urgency of tackling the energy sector’s ballooning debt, he criticized the timing and speed of the levy’s introduction.
He believes it should have been delayed until the mid-year budget review to provide businesses the space to adapt and plan for the fiscal changes.
The swift and hurried introduction, he says, has thrown into disarray the plans of businesses that forecasted based on the current form of the cedi since a new layer of cost has been introduced.
He explained, “Don’t forget that the cedi appreciation is helping the industry to plan. And then suddenly we get up in the morning and there’s another levy or another charge. Already, they have started planning. I think they should have waited at least. I know they would have had a shortfall, however, for prudence and goodwill purposes, it should have been held until they had a mid-year budget. So that they get businesses the room to plan.”
His comments come amid growing concerns from industry players and analysts about the increasing tax burden on businesses and households.
While the government insists the energy sector levy is a necessary tool to restore financial stability in the power sector, critics argue that the state is just “stealing away” the relief the cedi’s appreciation was bringing.
