GHANA's ENERGY SECTOR: POWER OUTAGES IN KUMASI , CURRENT CHALLENGES AND FUTURE PROSPECTS IN THE ENERGY SECTOR

 

Ghana's energy sector stands at a critical juncture, grappling with a confluence of financial constraints, infrastructural deficiencies and policy challenges. These issues have culminated in recurrent power outages, commonly referred to as "dumsor," affecting both urban centers and rural communities. Brief history of the Ghanaian Energy Sector This article throws more light into the multifaceted problems plaguing the sector, with a particular focus on the recent outages in Kumasi, and examines the role of international financial interventions in shaping Ghana's energy landscape.

Financial Strains and Debt Accumulation

A significant challenge confronting Ghana's energy sector is the mounting debt owed by the Electricity Company of Ghana (ECG) to Independent Power Producers (IPPs). As of April 2023, this debt was approximately $1.4 billion, leading IPPs to curtail or suspend their power supply. Notably, in November 2024, Amandi Energy and Karpowership disconnected from the national grid, while AKSA Energy reduced its supply from 370MW to a mere 58MW, resulting in a substantial 450MW shortfall on the grid.

The financial constraints extend beyond the power generation companies. The ECG and the Volta River Authority (VRA) are also struggling with liquidity issues, making it difficult to maintain and expand critical infrastructure. This has resulted in unreliable power supply, higher operational costs and prolonged service disruptions for consumers. For more information read about the rise of the Ghanaian Energy Sector Debt

Infrastructure Challenges: Recurrent Power Outages In Kumasi, 2025

The city of Kumasi has been particularly hard-hit by power outages. The ECG attributes these disruptions to technical issues, specifically faulty underground cables and overburdened transformers operating at full capacity due to increased demand. These technical challenges have led to blown fuses and broken conductors, causing outages, especially during peak hours from 7 pm to 11 pm.

In response, the ECG has initiated transformer upgrades and new projects aimed at enhancing the reliability of power supply in the region. However, residents remain skeptical, citing previous assurances that did not materialize into sustained improvements. With Kumasi being a key commercial hub, continued power instability could have dire economic consequences for businesses and households alike.

Policy Interventions and the Role of the IMF

In an effort to stabilize the economy, Ghana entered into a $3 billion Extended Credit Facility arrangement with the International Monetary Fund (IMF) in May 2023. While this program aims to restore macroeconomic stability and ensure debt sustainability, it has also introduced stringent fiscal measures. Critics argue that these austerity measures have inadvertently increased challenges within the energy sector by limiting the government's capacity to invest in critical infrastructure and settle outstanding debts to IPPs. Read about the cost of power generation by Independent Power Producers (IPPs) and Power Purchasing Agreements

In a recent interview, Ghana's President, John Dramani Mahama, emphasized his commitment to maintaining the IMF deal but expressed intentions to review and adjust it to better address local challenges. Mahama highlighted the need to tackle inflation and currency depreciation to alleviate the ongoing cost-of-living crisis affecting many Ghanaians. He also pointed out that the current IMF program has led to a "multiplicity of taxes," making the business environment less favorable. Additionally, he noted that the IMF's recommendations have not sufficiently pressured the government to eliminate wasteful spending.

One of the IMF's most controversial proposals is a 58% increase in electricity tariffs, a suggestion to the Ghanaian government in February 2025. This recommendation has sparked significant debate, as stakeholders consider the potential impact on consumers and the broader economy. An increase of this magnitude could place an additional burden on households already struggling with rising inflation and economic hardships. It could also deter industrial growth by increasing the cost of production, making local businesses less competitive. For more information read about the tariff pricing strategies in the energy sector in Ghana. This is a latest development as the government continues to navigate the critical issues in the sector. This condition of the IMF comes at the back of the energy sector not being financially sustainable, as it attempts to bridge the gap between cost of power generation and equal revenue generation to clamp down on the bad financial state of the sector.

The Way Forward: Balancing Reform with Investment

Addressing Ghana's energy crisis necessitates a multifaceted approach that balances fiscal responsibility with strategic investments. Key recommendations include:

1. Debt Restructuring: Prioritizing the settlement of arrears to IPPs to restore confidence and ensure consistent power supply.

1. Infrastructure Investment: Upgrading and maintaining critical infrastructure, such as transformers and transmission lines, to meet growing demand and prevent technical faults.

2. Policy Reforms: Revisiting existing agreements and policies to create a more conducive environment for investment and sustainable growth in the energy sector.

3. Diversification of Energy Sources: Investing in renewable energy sources to reduce dependence on traditional power producers and enhance energy security. Read about how the advancement in solar energy can help make the energy sector sustainable in Ghana.

In conclusion, while international financial assistance provides a framework for economic stabilization, it is imperative that such programs are tailored to address the unique challenges of energy. A collaborative effort between the Ghanaian government, international partners and private stakeholders is essential to navigate the current crisis and lay the foundation for a resilient and sustainable energy future.