Economist calls for energy sector reforms ahead of new levies

By: Ernest Afram

An economist, Dr. Larry Essilfie, has called on the government to confront the root causes of inefficiency in Ghana’s energy sector before introducing additional levies to address its ballooning debt.

Speaking in an interview with Zed FM on the recent postponement of the fuel levy, Dr. Essilfie said that while he understands the public’s frustration, he believes scrapping the proposed GHS1 levy altogether may not be the best option in the long term.

“I totally disagree with those calling for a complete cancellation of the levy. I understand their call, but the issue is deeper than that. There are fundamental challenges the government must urgently address within the energy sector,” he said.

According to him, the energy sector’s mounting debt, estimated at billions of cedis, is primarily driven by deep-rooted inefficiencies and systemic corruption, especially in procurement processes and contract management.

“Corruption alone is costing us heavily. The data in front of me shows we are losing close to US$250 million to corrupt practices. That’s about 20 to 30 percent of our energy sector debt,” he noted.

Dr. Essilfie also pointed to a triple burden of inefficiencies—technical, administrative, and operational—that continues to undermine revenue collection, service delivery, and sustainability in the sector.

“Revenue collection mechanisms are riddled with inefficiencies, and that’s one of the reasons why we keep accumulating debt. Government must fix these before looking at levies as the solution,” he cautioned.

He further attributed part of the sector’s woes to political interference and the appointment of unqualified individuals to key leadership roles.

“We continue to place people in charge who are not up to standard. Until we remove politics from technical positions in the energy sector, the inefficiencies will persist,” the economist warned.

Dr. Essilfie expressed concern that unless these structural issues are tackled, no amount of revenue raised from levies would prevent the recurrence of the crisis.

“You can introduce a hundred levies, but if the fundamentals are not addressed, we’ll still come back to the same debt problem,” he stressed.

Despite his criticism of how the sector is managed, Dr. Essilfie defended the government’s attempt to raise funds through the new levy. He clarified that consumers are not being charged an extra cedi, but are only missing out on a potential reduction.

“The idea that citizens are paying more is not entirely accurate. It’s just that the 1 cedi reduction you were supposed to enjoy is being used by government to settle the debt,” he explained.

Dr. Essilfie warned that failure to settle the debt owed to Independent Power Producers (IPPs) could lead to a power crisis, threaten jobs, and cripple the economy.

“If we default and the IPPs are unable to pay their bank loans, power supply will be disrupted, leading to job losses and economic decline,” he emphasized.

He urged the government to adopt innovative solutions to clear the debt while simultaneously tackling the inefficiencies plaguing the sector.

“Settling the debt is necessary, but let’s not miss the bigger picture, reform the system. That’s the only sustainable way forward,” he added.