The World Bank has approved a $250 million credit and a $10 million grant from the Energy Sector. The credit facility from its International Development Association (IDA) and the grant are meant for Ghana’s Energy Sector Management Assistance Programme for the Ghana Energy Sector Recovery Programme for Results (PforR).
This initiative aims to enhance the financial viability of electricity distribution and increase access to clean cooking solutions across Ghana over the next four years.
Electricity distribution losses in Ghana are notably high, primarily due to low collection rates and tariffs that do not cover costs, which significantly undermine the operational and financial health of the country’s energy utilities, the World Bank noted. Annually, the Government of Ghana allocates approximately 2% of its GDP to address these financial shortfalls in the energy sector.
This World Bank support is coming at a time when the country is going through another round of load shedding and an expected increase in electricity tariffs.
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The power is being rationed due to reduced gas supply from the West African Pipeline company as a result of maintenance works being undertaken by a gas supplier in Nigeria and is projected to last three weeks. Electricity tariff, on the other hand, will go up from July 1, 2024, by between 3.45% and 5.84% depending on the type of customer.
While the World Bank’s support will not directly address these two current challenges that confront consumers of electricity, it is expected to improve power supply in the medium to long term.
Robert Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone, in a statement, emphasised the Bank’s commitment, stating, “Through this important results-based financing, the World Bank is committed to supporting the recovery of Ghana’s energy sector and its financial sustainability. The operation aims to strengthen revenue collection and improve the quality of energy supply, including through investments in prepaid metering and in the commercial and meter management systems of distribution utilities.”
The PforR initiative will complement the regulatory and policy reforms supported under the World Bank’s Development Policy Finance series, including the IDA-supported First Resilient Recovery Development Policy Financing operation approved in January 2024, as well as the ongoing IMF Extended Credit Facility Programme for Ghana. It focuses on enhancing institutional capacity, and accountability, and directly financing capital expenditure programs for energy sector utilities.
Dhruva Sahai, Programme Leader for Infrastructure, highlighted the programme’s goals: “The PforR aims to reduce the cost of electricity service provision by improving the economic dispatch of generation and by strengthening the commercial and operational performance of distribution utilities.”
Additionally, the Clean Cooking Component of the Programme seeks to expand access to Liquified Petroleum Gas for households, schools, and businesses in Ghana. The PforR will provide incentives to subsidise the cost of stoves and accessories, excluding cylinders, for first-time domestic users, commercial caterers, and second-cycle schools. This initiative aims to boost women’s access to clean cooking solutions, reduce health risks associated with smoke from charcoal stoves, alleviate time poverty, and enhance women’s income-generating opportunities and employability.
