Former Minister for Energy, Dr. Kwabena Donkor, has thrown his support behind the newly introduced GH¢1 fuel levy, describing it as a necessary intervention to address Ghana’s ballooning energy sector debt and ongoing financial challenges.
Parliament recently passed the Energy Sector Levy (Amendment) Bill, 2025, which imposes a GH¢1 tax on every litre of petroleum products.
The government has defended the move, stating that it is vital to stabilise the sector, ensure consistent electricity supply, and reduce the country’s dependence on debt-financed fuel procurement.
Presenting the bill, Finance Minister Dr. Cassiel Ato Forson argued that the levy would not lead to higher pump prices due to the recent appreciation of the Ghanaian cedi.
According to him, the revenue generated will be used to procure fuel for power generation, thereby reducing outages and improving grid stability.
Ghana’s energy sector is currently burdened with a legacy debt estimated at $3.1 billion. Without timely intervention, government officials warn, the sector could slide into crisis, threatening the country with widespread power outages.
Despite government assurances, the new tax has drawn sharp criticism from the Minority in Parliament.
Minority Leader Alexander Afenyo-Markin accused the government of breaching its own commitment not to introduce new taxes, as stated in the 2025 national budget.
Speaking on Morning Starr with Naa Dedei Tettey, Dr. Donkor acknowledged the opposition’s concerns but emphasized that the realities of the energy sector demand pragmatic action.
He noted that in addition to servicing legacy debts, the sector is grappling with ongoing under-recovery — the inability to recoup the full cost of generating and distributing power.
While supporting the fuel levy, Dr. Donkor urged the government to implement accompanying reforms to ensure the sustainability of the power sector.
He explained that unless full cost recovery is achieved alongside the levy, the sector will continue to accumulate new debt, undermining the intended benefits of the tax.
Dr. Donkor highlighted the financial strain faced by Independent Power Producers (IPPs), who rely on timely payments to service the loans used to build their plants.
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He said, “Yes, we still have a challenge on our hands, which is one. But beyond that, beyond the legacy debt, we are under-recovering costs. And that is so important. I just hope people appreciate that. When you under-recover costs, it means you are piling up new debt in the power sector. So the one cedi imposed, I’m in full support of it. However, it should not be a stand-alone measure. If we continue under-recovering costs, then the one cedi will turn out to be inadequate. Because as of March, we have a sector debt of about $3.1 billion. If we were to apply all of the one cedi to just the current debt, in about three years, we should be able to liquidate the current debt.”
“But we can only do that if, in the three years, we also fully recover costs. As long as you under-recover costs, you’ll be adding up to the debt. It is, two weeks ago, for example, the Minister of Finance had to fine $50 million for power plants. Other than that, they might have shut down. Remember these IPPs? Each one of them, putting up a power plant in Ghana, has to take a loan. Project finances, equity and loans. So they also have loans to service. And therefore, if we do not pay them, the ability to service their contracted loans for the plant becomes compromised. And so we must be paying. So the one cedi must go with other measures.”
Source: Ghana/Starrfm.com.gh/Hamdia Mohammed
