The Ghanaian government has paid $1.47 billion to clear energy sector debts in the 2025 fiscal year. Finance Minister Ken Ofori-Atta announced the settlement on Monday. The payment resolves obligations to independent power producers and fuel suppliers. It also restores the World Bank's partial risk guarantee for the sector. This guarantee had been suspended since 2023 due to payment defaults.

Debt Settlement Details

The $1.47 billion payment represents Ghana's largest single energy sector settlement. It covers arrears accumulated since 2020. The government used funds from the 2025 budget allocation. This included revenue from petroleum levies and treasury bills. The Energy Sector Levy Act provided GHS 8.2 billion (approximately $650 million). International financing contributed the remaining $820 million. The settlement directly benefits three major independent power producers. These are Cenpower Generation Company, AKSA Energy, and Amandi Energy. All three had threatened legal action over unpaid invoices.

World Bank Guarantee Restoration

The World Bank confirmed restoration of its partial risk guarantee on Tuesday. This guarantee covers up to $500 million in potential payment defaults. It applies to power purchase agreements with independent producers. The guarantee had been inactive for 18 months. Its suspension increased borrowing costs for energy projects. Restoration should lower financing expenses by 2-3 percentage points. The World Bank's Ghana country director Pierre Laporte stated the decision followed "sustained fiscal reforms." The guarantee will remain in place through 2028.

Why It Matters

Ghana's energy debt had reached $2.9 billion by late 2024. This burden strained government finances and threatened power reliability. The settlement removes a major fiscal risk. It represents 4.2% of Ghana's 2025 GDP. Clearing these arrears improves the country's credit profile. Fitch Ratings noted the payment could support Ghana's sovereign rating review in Q3 2025. The energy sector consumes about 30% of government expenditure. Reducing this burden frees resources for other priorities. Businesses suffered from frequent payment delays to suppliers. The settlement should stabilize electricity supply and pricing.

Sector Impact

The payment immediately benefits electricity distributors. The Electricity Company of Ghana (ECG) receives $320 million to clear its arrears. This improves its ability to maintain grid infrastructure. Ghana Grid Company (GRIDCo) gets $180 million for transmission upgrades. Fuel suppliers including Tema Oil Refinery receive $210 million. Independent power producers obtain the remaining $760 million. The settlement follows Ghana's $3 billion IMF Extended Credit Facility program. That program requires energy sector reforms as a condition. The government has implemented tariff adjustments through the Public Utilities Regulatory Commission. Residential tariffs increased 29% in January 2025. Industrial tariffs rose 34%.

What Businesses Should Watch

Monitor implementation of the Energy Sector Recovery Program. This program aims to prevent future debt accumulation. It includes quarterly tariff reviews by the Public Utilities Regulatory Commission. The next review occurs in June 2025. Watch for new power purchase agreements. The government plans competitive bidding for future contracts. This could lower electricity costs for industrial users. Track the World Bank guarantee's effect on project financing. The Volta River Authority seeks $800 million for hydroelectric expansion. The restored guarantee should help secure this funding. Observe credit rating actions. Moody's will review Ghana's B3 rating in August 2025. A positive move could lower corporate borrowing costs.

Market Reactions

Ghana's dollar bonds gained 1.2% following the announcement. The 2032 bond yield fell to 9.8% from 10.3%. The Ghana Stock Exchange Composite Index rose 0.8% on Tuesday. Energy sector stocks led gains. Cenpower's parent company saw its share price increase 12%. The Ghana cedi stabilized at GHS 14.2 per US dollar. This follows 18% depreciation in 2024. Analysts expect reduced pressure on foreign reserves. Energy imports consumed $350 million monthly. The settlement should lower this to $280 million. The Bank of Ghana's reserves stood at $5.1 billion in March 2025. That covers 2.8 months of imports.

Future Challenges

Ghana must maintain payment discipline to avoid recurring debt. The Energy Ministry projects sector costs will reach $2.1 billion in 2026. That assumes 6% annual demand growth. The government plans to diversify energy sources. Solar projects should provide 500 MW by 2027. The Bui Power Authority leads this expansion. Natural gas will increase from 50% to 60% of generation. The Tema LNG terminal began operations in February 2025. It supplies 250 million standard cubic feet daily. Technical losses remain high at 22%. The Electricity Company of Ghana aims to reduce this to 18% by 2026. Success requires $400 million in grid investments.