The International Monetary Fund (IMF) has attributed improvements in Ghana’s energy sector fiscal performance to the appreciation of the cedi, improved revenue collection by the Electricity Company of Ghana (ECG), and better implementation of the cash waterfall mechanism.
The IMF Resident Representative in Ghana, Dr Adrian Alter, said government’s efforts to optimise the energy mix and reduce the cost of electricity generation had also contributed to the improvement.
Speaking in an interview with Bernard Avle on Channel One TV’s The Point of View on Monday, August 24, Dr Alter explained that a significant portion of government expenditure in the energy sector was denominated in US dollars.
He said payments to fuel suppliers and independent power producers (IPPs) were largely made in US dollars, with the appreciation of the cedi reducing the local-currency cost of meeting those obligations.
“The government in the 2025 budget had in mind a certain exchange rate, and most of the expenses on the energy side are in dollars. Imports of fuel, so fuel suppliers are paid in dollars, all the IPPs are paid in dollars,” he said.
“When you translate that into cedis, if the currency appreciates, then there is an improvement,” he added.
Dr Alter, however, stressed that the stronger cedi was only one of several factors behind the improvement in the sector’s fiscal performance.
“There has been slightly better revenue collection at the ECG. There has been a better implementation of the cash waterfall mechanism,” he said.
He also said the government had become more deliberate in managing the country’s energy mix to reduce the cost of electricity generation.
According to him, increased reliance on domestically produced natural gas had helped reduce dependence on more expensive imported liquid fuels.
“The government has been more careful about the energy mix and trying to reduce the costs of producing electricity. Using domestically produced gas is much better than importing liquid fuel from abroad,” he said.
Dr Alter said the combined effect of these measures was improving the profitability of the energy sector and reducing the financial risks it posed to the government.
He said sustaining the gains would be important to ensuring that the energy sector no longer placed significant pressure on the country’s public finances.
“All these measures are essential to the sector’s profitability and eventually reducing the fiscal risks to the government,” he said.
source: citinewsroom.com
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