0
0 Accra, Ghana – As Ghana’s energy sector debt balloons beyond GHC 45 billion, journalist and education policy analyst Ellis Ferdinand has made a strong case in support of the government’s decision to increase the Energy Debt Recovery Levy (EDRL) from GHC 0.49 to GHC 1.49 per litre.
While the move has drawn sharp criticism from some quarters over the expected rise in fuel prices, Ferdinand argues that the levy is not only justified but urgent and unavoidable if Ghana is to avert an energy sector collapse and end the recurring national crisis of power outages, popularly known as “dumsor.”
💰 Fuel Levy: Painful, But Strategic
In a recent paper, Ferdinand defends the government’s plan to raise GHC 15 billion in 2025 through the levy, describing it as a “strategically sound policy decision grounded in economic logic and global best practice.”
He asserts that without decisive action, Ghana risks further sovereign credit downgrades, utility collapse, and deeper economic instability.
“This is not simply about making fuel more expensive,” Ferdinand writes. “It is about stabilizing a broken sector, restoring public trust in electricity delivery, and preventing dumsor from becoming Ghana’s permanent economic shadow.”
📊 Cost Reflectivity and Accountability
According to Ferdinand, one of the underlying issues is Ghana’s failure to charge the true cost of power production, transmission, and distribution. He notes that over 30% of electricity distributed by ECG is either lost or unaccounted for, and taxpayers are effectively footing the bill for these inefficiencies.
“A fuel-based levy links energy consumption directly to debt recovery,” he writes. “This ensures that the burden is shared more fairly by those who consume the most and benefit from reliable power.”
Ferdinand adds that such fuel-based levies have worked in Indonesia, India, and other middle-income countries, where targeted consumption taxes helped governments address structural power deficits.
🏗 ECG Reform Is Non-Negotiable
Crucially, Ferdinand insists that the fuel levy must not stand alone. He calls for the privatization of the Electricity Company of Ghana (ECG) and its listing on the Ghana Stock Exchange as part of broader structural reforms.
“Without tackling ECG’s losses and inefficiencies, the fuel levy is like pouring water into a basket,” he warns. “Privatization offers transparency, public oversight, and commercial discipline—just as we’ve seen in Uganda and the Philippines.”
⚡ Fuel Levy as Insurance Against Dumsor
Ferdinand argues that the real cost of doing nothing is the recurrence of dumsor, which has already cost Ghana billions in lost productivity and investor confidence. He proposes using part of the levy proceeds to create a ring-fenced energy stability fund that will help pay Independent Power Producers (IPPs), upgrade the national grid, and purchase fuel reserves.
“The levy should protect Ghanaians not just from blackouts, but from economic paralysis,” he states. “A reliable grid is a magnet for investment and growth.”
⚖️ Equity Through Smart Design
While he acknowledges concerns that the levy may disproportionately affect low-income citizens, Ferdinand believes it can be progressive in effect if a portion is used to support lifeline tariffs, rural solar systems, and other pro-poor energy subsidies.
“Fuel levies are regressive only if poorly designed. With the right safeguards, they can support the poor while ensuring that high energy consumers pay their fair share.”
📌 Conclusion: A Tough Call, But the Right One
Ellis Ferdinand concludes that while the Energy Debt Recovery Levy is a difficult decision politically, it is Ghana’s best option for resolving long-standing energy sector failures.
“We can either choose a structured path to stability now, or face unstructured collapse later,” he writes. “The fuel levy, painful as it is, is a national investment in energy security, economic recovery, and future prosperity.”
About the Author:
Ellis Ferdinand is an education and policy journalist. He writes on governance, public finance, and social equity in Africa. Contact him at ellisferdinand@ymail.com.
© June 7, 2025
