Accra, 3rd March 2025 – During his presentation at the National Economic Dialogue, Hon. Dr. Cassiel Ato Forson, Minister for Finance, issued a stark warning about the deteriorating financial health of Ghana’s energy and cocoa sectors, both of which are posing significant fiscal risks to the nation’s economy.
Dr. Forson described the energy sector as a “ticking time-bomb,” highlighting that it costs the country approximately 2% of its GDP annually. He pointed out that the objectives of the Energy Sector Recovery Program (ESRP) are far off-track, with key issues such as high generation costs, limited renewable energy capacity, and high distribution and collection losses by the Electricity Company of Ghana (ECG).
The ECG collects only 62% of the energy it purchases, and of that, only about 65% is used to pay suppliers through the Cash Water Mechanism.
Furthermore, the Minister noted that the current non-cost-reflective tariffs are covering only about 50% of the cost of service provision, which is unsustainable. He cautioned that tariffs should not be used as a tool to reward inefficiencies within ECG or other stakeholders in the energy sector. With unpaid legacy arrears amounting to US$1.3 billion by the end of 2022, and an annual sector shortfall projected to reach US$2.2 billion in 2024 despite government transfers, Dr. Forson emphasized that the financial gap for the energy sector could exceed US$9 billion by 2026 if urgent reforms are not implemented.
The cocoa sector also emerged as a major concern, with Dr. Forson revealing that declining cocoa production and the disparity between market prices and farmer payments are exacerbating fiscal risks. Over the past three years, cocoa production has dropped by nearly 50%, and during the 2023/2024 crop season, the Ghana Cocoa Board (COCOBOD) was unable to meet its supply commitments, resulting in significant revenue losses. Dr. Forson reported that both COCOBOD and Ghanaian farmers lost US$840 million due to locked-in lower forward sales prices, with additional losses of US$495 million from rolled-over contracts.
The Minister also warned that large gaps between market prices and payments to farmers are fueling cocoa smuggling, threatening the long-term sustainability of the sector. For every tonne of cocoa delivered to fulfill the rolled-over contracts, COCOBOD and farmers are losing US$4,000 in revenue. In addition to these financial challenges, Dr. Forson highlighted COCOBOD’s extra-budgetary spending, which is contributing to rising fiscal risks. COCOBOD’s total debt stands at GHS32.5 billion (approximately US$2.1 billion), with GHS9.7 billion due for repayment by September 2025. The Minister also raised concerns over GHS21 billion (US$1.3 billion) in outstanding cocoa road contracts, with only GHS4.4 billion of that amount accounted for in COCOBOD’s financial statements, and supplier arrears that remain difficult to quantify due to a lack of transparency.
Dr. Forson stressed that immediate and comprehensive reforms are essential to address these critical issues in both the energy and cocoa sectors, which, if left unchecked, could significantly undermine Ghana’s fiscal stability and long-term economic growth.
Source:Mybrytfmonline.com/Isaac Acheampong
