Tariff Cuts Offer Relief, But Sustainability in Doubt — Economist

By: Solomon Nartey Tetteh

Development Economist, Dr. Felix Larry Essilfie, has described the recent downward review of electricity and water tariffs as positive news for businesses and households, but cautioned that its long-term sustainability remains uncertain.

His comments come on the back of a recent announcement by the Public Utilities Regulatory Commission (PURC) reviewing electricity and water tariffs, with an average reduction of 4.81% for electricity and 3.06% for water, effective April 1, 2026.

Speaking on the Business Breakfast on ZED 101.9FM, Dr. Essilfie noted that, in principle, the reduction should bring relief to industries, manufacturing firms, and consumers who have long grappled with high utility costs.

“In principle, a downward review of electricity and water tariffs should be good news to industries, manufacturing companies, firms in general, and also households,” he stated.

However, he stressed that the key issue is not just the immediate benefits but whether such reductions can be maintained under current economic conditions.

“Is it sustainable given the prevailing local and global economic conditions? That is the whole point,” he emphasised.

Dr. Essilfie explained that while the tariff cuts may appear beneficial on the surface, a deeper assessment is required to determine their viability. According to him, both domestic economic pressures and global economic trends must be taken into account when evaluating the decision.

“Since I heard the news about this reduction, the question that has been lingering in my head is whether it is sustainable,” he said.

The economist warned that without a strong and stable economic foundation, such reductions could be difficult to sustain over time, potentially leading to future adjustments that may reverse the gains.

The Economist also indicated that recent utility tariff reductions could bring some relief to households, but their overall economic impact may remain modest.

He explained that while consumers are likely to experience slight improvements in disposable income, the significance of these gains is uncertain.

“There will be a positive effect as far as disposable incomes are concerned, but in terms of its significance, it is a bit questionable,” he stated.

According to him, the direct effect will be felt immediately by households through reduced spending on utilities such as electricity and water.

“If you are currently spending about 300 cedis a month on electricity, a tariff reduction could lead to savings of around 20 to 50 cedis,” he explained.

Dr. Essilfie further noted that these savings arise because households directly pay for these services, making the benefits more visible in the short term.

However, he cautioned that the indirect effects which would typically come from reduced production costs for businesses may not significantly translate into lower prices for consumers.