Urgent Actions Needed for Energy and Cocoa Sectors – IMF

IMF Highlights Critical Challenges in Ghana’s Energy and Cocoa Sectors

The International Monetary Fund (IMF) has emphasized the importance of addressing persistent challenges in Ghana’s energy and cocoa sectors as part of broader efforts to sustain fiscal reforms under a $3 billion bailout programme. This comes after the IMF’s Executive Board approved the fourth review of the Extended Credit Facility (ECF), which unlocked an additional disbursement of $367 million.

Despite showing stronger-than-expected economic growth in 2024 and early 2025, driven by robust activity in mining, agriculture, information and communication technology (ICT), and manufacturing, core programme performance faced setbacks at the end of 2024. These issues were attributed to pre-election fiscal slippages and delays in implementing structural reforms.

Preliminary data indicated a sharp rise in government arrears before the December 2024 general elections, with inflation surpassing targets. The metric ended the year at 23.8 percent, 80 basis points higher than the previous year and more than double the Bank of Ghana’s aspirational upper limit.

However, the new administration has taken what the IMF described as “bold corrective actions.” This includes the enactment of a 2025 budget aimed at achieving a 1.5 percent primary fiscal surplus through a combination of revenue mobilization and expenditure rationalization.

IMF Deputy Managing Director, Bo Li, noted that “the authorities are strongly committed to restoring fiscal discipline and addressing the structural weaknesses that led to the slippages. Forcefully addressing the challenges in the energy sector and related arrears is critical to contain fiscal risks,” he added.

Energy Sector Struggles

The energy sector remains a significant burden on public finances. State-owned power utilities face mounting arrears due to inefficiencies in revenue collection, legacy debts, and delays in cost-reflective tariff adjustments. As of March 2025, the power sector had accumulated debts totaling $3.1 billion, with an estimated $3.7 billion needed to fully settle all outstanding arrears.

Analysts warn that this situation poses a direct risk to the fiscal consolidation efforts outlined in the bailout programme. In response, the government expedited the introduction of the Energy Sector Levy (Amendment) Bill, proposing a GH¢1 increase in the levy on petroleum products. This aims to generate an additional GH¢5.7 billion in revenue.

Cocoa Sector Pressures

Similarly, the cocoa sector faces pressure despite record prices for the commodity. In 2025, global cocoa prices experienced unprecedented volatility, peaking in the first quarter at over US$10,700 per tonne due to severe supply shortages caused by poor weather and disease outbreaks in major West African producers like Ghana and Côte d’Ivoire.

This marked a 60-year high, driven by fears of a deepening global cocoa deficit. However, from April through June, prices began to ease gradually—falling to around US$8,400 per tonne—as forecasts pointed to an 8 percent year-on-year improvement in production and improved weather conditions.

Despite the decline, prices remained significantly higher than historical averages. Domestically, production and export volumes have fallen below expectations. Factors such as aging trees, disease outbreaks, smuggling to neighboring countries, and global price volatility have constrained earnings from one of Ghana’s key export commodities.

Government Initiatives

Currently, the government is working to reverse the trend by reviewing the structure of COCOBOD operations and taking steps to cut costs, enhance procurement transparency, and increase farmer incentives to reduce cross-border leakage.

The IMF has made it clear that improving the performance of state-owned enterprises (SOEs), particularly in energy and agriculture, is integral to the broader fiscal reform agenda. In its latest review, the Fund underscored the need for enhanced public financial management and tighter budget controls to ensure that spending commitments align with available resources.

Macroeconomic Stability Efforts

The central bank has also taken action to support macroeconomic stability, tightening monetary policy to combat inflation and rebuild reserves. The Bank of Ghana has implemented additional supervisory measures targeting weak and undercapitalized banks, with a focus on recapitalization and governance reforms. Officials say a risk-based monitoring framework has been escalated to identify systemic vulnerabilities in the financial sector.

Efforts to restructure public debt are also progressing. The government has secured a Memorandum of Understanding with official bilateral creditors under the G20 Common Framework and is now moving to finalize the necessary bilateral agreements. It is also engaged in talks with commercial creditors on terms consistent with the principle of comparability of treatment.

Outlook for Ghana

As a result of these developments, Ghana has seen a modest improvement in its international credit ratings, with agencies citing stronger fiscal signals and debt restructuring progress. Nonetheless, the IMF emphasized that the path to full macroeconomic stability remains fragile and dependent on continued reform.

“Improving tax administration, strengthening expenditure controls, and improving SOEs’ efficiency are of the essence to underpin durable adjustment,” Mr. Li stated.

The Fund reiterated that tackling energy sector inefficiencies and boosting cocoa sector performance will be decisive in safeguarding Ghana’s fiscal reform efforts and preventing a repeat of the slippages that undermined performance in 2024.