Plans are underway to hand over the operations of the Electricity Company of Ghana (ECG) to a private sector player, as mounting financial pressures continue to expose the fragility of the country’s power distribution system and the growing fiscal risks facing the state.
The International Monetary Fund (IMF) disclosed in its latest Staff Report on Ghana that government is moving decisively toward private sector participation in electricity distribution, with concrete steps expected before the end of 2025.
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According to the Fund, a transaction advisor is expected to be hired by the close of the year to oversee the selection of private sector concessionaires to take over ECG’s operations.
The move is being justified largely by the precarious financial position of ECG and the broader energy sector, which continues to generate significant shortfalls that government is forced to absorb.
In 2025 alone, the IMF estimates that the energy sector recorded a financing gap of more than US$500 million, an amount that was ultimately assumed by the state through a combination of legacy debt payments and fuel purchases.
Although the 2025 outturn is significantly lower than the originally budgeted annual shortfall of US$1.7 billion, the Fund insists that the underlying structural weaknesses remain unresolved.
It has therefore urged the authorities to intensify efforts to restore ECG to financial sustainability and reduce the persistent fiscal risks emanating from the power sector.
To cushion the impact of these pressures, the IMF noted that the 2026 Budget has made provision for GH¢15 billion, equivalent to about US$1.1 billion, to cover the projected energy sector shortfall, in addition to agreed payments on legacy debt.
The Fund explained that the smaller budgeted gap is justified by the improved 2025 performance, as well as expectations of lower power generation costs following the renegotiation of power purchase agreements and reduced reliance on expensive liquid fuels.
Despite these improvements, ECG’s financial position remains strained.
The IMF observed that while the energy sector is showing signs of stabilisation, the liabilities within the system are still substantial. ECG’s payments to independent power producers (IPPs) through the cash waterfall mechanism increased markedly, reaching US$308 million in the first half of 2025 alone, compared with US$325 million for the whole of 2024.
However, at the end of June 2025, the stock of net payables owed by ECG to IPPs stood at US$1.2 billion, representing an increase of US$71 million compared with the end of 2024.
In addition, the company owed fuel suppliers US$830 million, although this figure was US$124 million lower over the same period.
The IMF attributed the rise in payables to IPPs in the first half of 2025 largely to significantly lower direct government payments to power producers compared with the previous two years, which more than offset the higher payments made by ECG itself.
Against this backdrop, the Fund revealed that government and IPPs have reached an agreement to restructure legacy debts that have accumulated over several years.
In the third quarter of 2025, government concluded negotiations with nine IPPs, which together account for virtually all net payables as at end-June 2025.
The agreement provides for a comprehensive payment plan covering arrears accumulated up to that date.
Under the arrangement protocol, the legacy debts will be subjected to substantial haircuts ranging between 15 and 30 per cent.
This will be complemented by significant upfront payments of around US$300 million in 2025, representing between 10 and 100 per cent of each IPP’s post-haircut payables.
The remaining balances will be settled through biannual payments spread between 2026 and 2029.
In addition, the IPPs have agreed to revised power purchase agreements, which are expected to lower electricity costs going forward and ease pressure on ECG’s finances.
These revised agreements were adopted by Parliament in November 2025 and replace earlier PPAs that were abandoned after the government failed to meet payment obligations in 2024.
Looking ahead, the IMF projects that the energy sector will continue to face significant financing challenges.
In 2026, the overall sector shortfall is estimated at US$1.103 billion, made up of a US$925 million power sector gap and a US$178 million gas sector shortfall. Revenue collection is projected at US$2.607 billion, while total generation costs are estimated at US$3.53 billion.
The cost structure includes US$786 million in operating expenditures, US$918 million in other fuel payments, US$270 million for liquid fuels, US$478 million in capital expenditure and US$165 million in debt servicing obligations.
It is against this difficult financial backdrop that the IMF believes private sector participation in electricity distribution has become unavoidable.
By bringing in a concessionaire with stronger operational efficiency, improved revenue collection capacity and access to capital, the Fund argues that ECG’s chronic losses can be curtailed, while reducing the heavy burden the sector continues to place on the national budget.
