On June 3, 2025, Ghana’s Parliament passed the Energy Sector Levies (Amendment) Bill, introducing a GH¢1 per litre levy on petroleum products, which includes a component known as the Sanitation and Pollution Levy.
This measure, set to take effect on July 16, 2025, aims to rake in approximately GH¢5.7 billion annually to address the energy sector’s staggering US$3.1 billion debt and fund fuel procurement for power plants, mitigating the persistent power outages known as "dumsor."
While the levy is a necessary step to stabilise Ghana’s energy sector, the government must simultaneously tackle the entrenched inefficiencies of the Electricity Company of Ghana (ECG) to ensure long-term sustainability and prevent further financial burdens on citizens.
The energy sector’s financial crisis is not a new phenomenon. Decades of underfunding, policy missteps, and operational inefficiencies have culminated in a debt burden that threatens the stability of the national electricity supply.
The Energy Sector Levies Act (ESLA), first introduced in 2015, was designed to address similar challenges by generating revenue to clear legacy debts and ensure fuel procurement for thermal plants.
More debt to pay
Despite generating substantial funds, ESLA has fallen short of resolving the debt crisis, with the sector’s indebtedness reaching US$3.1 billion by March 2025, according to figures from the Ministry of Energy.
The new levy, which includes the Sanitation and Pollution Levy to address environmental concerns alongside energy debt repayment, is a strategic intervention to bridge this fiscal gap.
According to Finance Minister Dr Cassiel Ato Forson, an additional US$3.7 billion is required to clear all arrears, with US$1.2 billion needed for fuel procurement in 2025 alone.
The rationale for the levy is compelling. Ghana’s energy sector is at a critical juncture, with unpaid debts to independent power producers (IPPs) and fuel suppliers exacerbating power outages that disrupt businesses, health care and daily life.
Critics of the bill are concerned about the lack of a sunset clause on the levy.
The levy provides a dedicated revenue stream to stabilise the sector, ensuring that power plants remain operational and reducing the risk of widespread blackouts.
The International Monetary Fund (IMF) has endorsed this measure, noting its alignment with Ghana’s fiscal goals under the Extended Credit Facility (ECF) programme.
Furthermore, the recent appreciation of the Ghana cedi by over 30 per cent against the U.S. dollar has lowered fuel prices, making the levy’s introduction timely, as it mitigates the immediate impact on consumers.
The Independent Power Generators, Ghana (IPGG), are in strong support, emphasising that the consequences of inaction—blackouts, plant shutdowns, and job losses—are far more severe than the temporary burden of the levy.
However, the levy’s success hinges on addressing the elephant in the room: the inefficiencies of the Electricity Company of Ghana (ECG). ECG’s operational challenges are a significant driver of the sector’s financial woes.
Distribution losses average 30 per cent, meaning that for every 100 units of power received, approximately 30 units are unaccounted for due to technical inefficiencies, commercial shortcomings, and corrupt practices such as illegal connections.
Losses undermine ECG’s financial viability and place an undue burden on taxpayers who ultimately bear the cost of the sector’s debts through levies like the one recently passed.
The government’s recent performance contract with ECG, as announced by the Energy Minister John Jinapor, is a step in the right direction, focusing on boosting revenue collection and reducing system losses.
Yet, more robust measures are needed to ensure accountability and efficiency.
To maximise the levy’s impact, the government must prioritise comprehensive reforms at ECG. First, addressing technical losses requires investment in modernising the ageing distribution infrastructure. Upgrading transformers, transmission lines, and metering systems can significantly reduce power wastage.
Additionally, tackling commercial losses demands stricter enforcement against illegal connections and improved billing systems to ensure accurate revenue collection.
The Cash Waterfall Mechanism, designed to equitably distribute energy sector revenues, must be rigorously enforced to prevent misapplication of funds, a criticism levelled at previous ESLA initiatives.
Third, combating corruption within ECG is critical.
Transparent procurement processes and regular audits can curb mismanagement and ensure that funds, including those from the new levy, are used effectively.
Public-private partnerships (PPPs) offer a promising avenue for reform.
By leveraging private sector expertise and funding, ECG can improve operational efficiency and revenue collection without full privatisation, which is impractical under current economic conditions.
The government should also expand lifeline tariff programmes to protect low-income households from the levy’s impact, ensuring equitable access to electricity.
Public scepticism, fuelled by past levies that failed to deliver promised improvements, points to the need for transparency.
The Ministry of Energy’s commitment to regularly update citizens on the levy’s use is commendable, but concrete mechanisms such as public reporting portals must be established to maintain trust.
Necessary
The GH¢1 per litre levy is a necessary intervention to address Ghana’s energy sector debt and ensure a stable power supply.
Its projected revenue of GH¢5.7 billion annually offers a lifeline to a sector drowning in US$3.1 billion of debt.
However, its effectiveness depends on simultaneous reforms to address ECG’s inefficiencies.
By modernising infrastructure, enforcing revenue collection, combating corruption, and fostering public-private partnerships, the government can ensure that the levy serves as a bridge to a sustainable energy future rather than a recurring burden on Ghanaians.
The path forward requires bold action, transparency, and a commitment to systemic change to deliver reliable, affordable electricity for all.
The writer is the immediate-past President-General, West Africa Nobles Forum; Chancellor, Wisconsin International University College.
