Accra, Ghana – After initially rejecting the proposal in a surprise vote on July 30, the Parliament of Ghana has now approved a $250 million loan facility from the International Development Association (IDA) of the World Bank Group. The loan will finance the Ghana Energy Sector Recovery Programme, aimed at addressing critical issues within the country’s electricity sector.
The loan, which is part of a $260 million total package, will support efforts to reduce the cost of electricity purchases, improve revenue collection for the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCo), and strengthen financial management systems. Additionally, it will contribute to the National LPG Promotion Programme, which seeks to enhance access to liquefied petroleum gas across the country.
Initial Rejection and Reconsideration
The loan was initially rejected on July 30, 2024, after Asawase MP Alhaji Mohammed Mubarak Muntaka raised concerns about the allocation of funds for consultancy services. During parliamentary debate, Muntaka pointed out that $90 million of the loan appeared to be earmarked for consultancy fees, a figure that he found disproportionate. This objection led to the rejection of the loan by a voice vote.
However, Parliament was recalled from recess on September 3 and 4 for an extraordinary session to reconsider the loan. During this session, the debate over the $90 million allocation was revisited. Speaker of Parliament Rt Hon Alban Sumana Kingsford Bagbin referred the matter back to the Finance Committee for further scrutiny. Upon review, the committee clarified that the $90 million figure represented a bulk allocation for “goods and services” and was not solely intended for consultancy.
Loan Details and Programme Components
The $260 million Energy Sector Recovery Programme will be funded by $250 million from the IDA facility and an additional $10 million grant. The programme is designed to address challenges in electricity access, particularly in rural and underserved areas.
The initiative consists of two components: the Programme for Results (P for R) and Investment Project Financing (IPF).
- P for R will focus on reducing commercial losses and increasing revenue collection by installing smart prepaid meters and upgrading ECG’s information technology infrastructure. It will also enable ECG to produce detailed energy accounting reports, beginning at the regional level and eventually extending to districts, enabling more targeted revenue protection measures.
- IPF will support other critical investments aimed at improving the financial and operational efficiency of ECG and NEDCo.
Loan Terms and Financial Structure
The $250 million IDA loan will be structured with $110 million sourced from the IDA’s Performance-Based Allocation (PBA) and $140 million from the IDA Scale-up Window Shorter Maturity Loans (SUW-SML). The loan carries a six-year grace period and a six-year repayment period for the SUW-SML portion, with a commitment charge of 0.5% per annum on the unwithdrawn balance.
Government’s Commitment to Energy Reforms
This programme is part of the government’s broader efforts to reform the energy sector and ensure equitable electricity access across the country, especially in rural areas. The approval of the loan marks a significant step forward in addressing the financial and operational challenges facing Ghana’s electricity sector.
With the programme now set to move forward, Ghana is poised to modernize its electricity infrastructure, improve revenue collection, and support the sustainable expansion of energy services to underserved regions.
