Ghana Loses 2% of GDP Annually Due to Electricity Sector Inefficiencies – Finance Minister —Ghana’s economy is losing approximately 2% of its Gross Domestic Product (GDP) each year due to inefficiencies in the electricity sector, according to Dr. Cassiel Ato Forson, Minister of Finance.
Speaking at the National Economic Dialogue on Monday, Dr. Forson highlighted the Electricity Company of Ghana’s (ECG) failure to collect payments from all electricity consumers, leading to an annual revenue loss of about 25%. This translates to approximately $418.2 million in losses caused by power theft and non-payment.
He further disclosed that only 62% of the total energy purchased by ECG is actually paid for by consumers, and of that amount, only 65% is used to pay suppliers through the Cash Water Mechanism. He also criticized the existing electricity tariffs, stating that about 50% of the cost of providing electricity remains uncovered, adding that tariffs should not serve as compensation for ECG’s inefficiencies.
“These financial shortfalls have hindered the company’s ability to invest in infrastructure improvements and maintain a stable power supply,” Dr. Forson stated.
The impact of ECG’s inefficiencies extends beyond the energy sector, affecting industries such as agriculture, manufacturing, and general economic productivity due to unreliable electricity supply.
Ghana has faced longstanding challenges with its power sector, including the severe energy crisis between 2012 and 2015, commonly known as “dumsor.” In response, the government signed numerous power purchase agreements with independent power producers, leading to an oversupply of energy. By 2018, the country’s installed generation capacity was nearly twice its peak demand, forcing the government to pay for unused electricity. This situation has contributed to an annual deficit of approximately $1 billion in the energy sector.
Dr. Forson also raised concerns about the Energy Sector Recovery Program (ESRP), a roadmap designed to restore financial stability in the energy sector, stating that it is currently off track. He emphasized the need for urgent reforms and strategic measures to address these inefficiencies and drive economic growth.
As Ghana continues to grapple with energy sector challenges, experts argue that decisive action is required to prevent further financial losses and ensure a sustainable power supply for economic development.
