The World Bank has approved a $260 million financial package aimed at revitalizing and sustaining the country’s energy infrastructure.
This package includes a $250 million credit from the International Development Association (IDA) and a $10 million grant from the Energy Sector Management Assistance Programme. Over the next four years, these funds will drive the Ghana Energy Sector Recovery Programme for Results (PforR), designed to enhance the financial viability of electricity distribution and expand access to clean cooking solutions.
Ghana’s energy sector faces substantial challenges, including high electricity distribution losses caused by low collection rates and tariffs that do not cover costs. These issues severely impact the operational and financial performance of the country’s energy utilities, prompting the government to allocate approximately 2 percent of GDP annually to offset the sector’s financial deficits.
Robert Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone, emphasized the importance of this results-based financing. “Through this crucial initiative, the World Bank is dedicated to supporting the recovery and financial sustainability of Ghana’s energy sector,” Taliercio stated.
The PforR initiative aims to enhance revenue collection and improve the quality of energy supply. Key investments will be made in prepaid metering systems and the commercial and meter management systems of distribution utilities. These efforts are expected to significantly strengthen the operational capabilities and financial health of these utilities.
Complementing the PforR, the World Bank’s Development Policy Finance series, including the IDA-supported First Resilient Recovery Development Policy Financing operation approved in January 2024, and the ongoing IMF Extended Credit Facility Programme for Ghana, are also supporting regulatory and policy reforms in the energy sector.
Dhruva Sahai, Programme Leader for Infrastructure, highlighted the broader objectives of the PforR. “This operation aims to reduce the cost of electricity service provision by optimizing the economic dispatch of generation and enhancing the commercial and operational performance of distribution utilities,” Sahai explained.
A notable component of the Programme is its focus on increasing access to clean cooking solutions. The Clean Cooking Component will expand the availability of Liquefied Petroleum Gas (LPG) to Ghanaian households, schools, and businesses. The PforR will provide subsidies for stoves and accessories – excluding cylinders – to first-time domestic users, commercial caterers, and secondary schools. These efforts are particularly aimed at improving women’s access to clean cooking solutions, reducing health risks from smoke exposure, and enhancing income-generating opportunities and employability for women.
The IDA, established in 1960, is a crucial partner for the world’s poorest countries, providing grants and low to zero-interest credits for projects that drive economic growth, reduce poverty, and improve living conditions. As one of the largest sources of assistance for the world’s 74 poorest countries, IDA’s resources have brought positive changes to the lives of 1.3 billion people. Since its inception, IDA has provided $458 billion to 114 countries, with Africa receiving about 70 percent of its annual commitments over the past three years.
The World Bank’s commitment to Ghana’s energy sector marks a pivotal step towards achieving financial sustainability and improved energy access for the nation. As the PforR initiative unfolds, it promises to bring transformative benefits, ensuring a brighter and more sustainable future for Ghana’s energy landscape.