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Today, June 4th, 2025, the government has imposed a fresh blow to consumers, an additional GHS 1 tax per litre of fuel. Considering that fuel already sells for GHS 12.40, this amounts to an alarming 8% hike.
Prof. Isaac Boadi Dean, Faculty of Accounting and Finance, UPSA and the Executive Director, Institute of Economic and Research Policy (IERPP), questions Mahama’s rationale for the introduction of Energy Sector Levy. Find below the five (5) government rationale for the introduction of the Energy Sector levy:
1. “Addressing Energy Sector debt and shortfalls” – A crisis of their own making
Government Claim: The energy sector debt stands at $3.1 billion, requiring $3.7 billion to clean up, including $632 million to restore guarantees.
The Truth:
• Who created this mess? The same government that signed reckless Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs), locking Ghana into take-or-pay contracts that force us to pay for unused power.
• Where did the money go? Despite collecting billions in energy levies since 2015, the debt keeps growing. Where is the accountability?
• IMF Bailout Already Covering This: Ghana’s $3 billion IMF bailout includes energy sector reforms. Why double-tax Ghanaians when IMF funds should be fixing this?
IERPP’s proposed solution:
• Renegotiate or cancel bad PPAs (like Kenya did, saving $1 billion).
• Prosecute officials who signed these shady deals.
• Use IMF funds efficiently instead of piling taxes on suffering citizens.
2. “Stabilizing power supply” – A lie built on inefficiency
Government Claim: Thermal power costs aren’t in tariffs, requiring $1.2 billion for fuel, or else tariffs rise 50%.
The Truth:
• Why is Ghana still reliant on expensive thermal power? Despite $1 billion spent on Ameri and other emergency plants, we still face dumsor due to mismanagement.
• Renewable energy? Forgotten. Solar and wind projects stalled while corrupt contracts for diesel generators flourish.
• 50% tariff hike threat? A scare tactic. The government wastes 30% of generated power through technical and commercial losses (per ECG reports). Fix that first!
IERPP’s proposed solution:
• Accelerate renewable energy investments (solar, wind) to cut reliance on costly fuel.
• Overhaul ECG & NEDCo to reduce losses.
• End fuel smuggling (estimated $500 million yearly loss).
3. “Preventing sector collapse” – Fear-mongering to justify more taxes
Government Claim: The power sector will collapse without this levy.
The Truth:
• The sector is collapsing because of corruption, not lack of funds.
• Where are the audits? No serious effort to recover stolen funds (e.g., PDS scandal, Ameri deal investigations).
• Ghana Gas is underutilized. We have local gas, yet we import expensive diesel. Why?
IERPP’s proposed solution:
• Maximize domestic gas use (Atuabo, Sankofa fields).
• Stop political interference in energy sector management.
4. “Revenue without price hikes” – A deceptive gimmick
Government Claim: The levy won’t raise pump prices because of a “strong Cedi.”
The Truth:
• The Cedi is NOT strong. It lost 30% in 2024 (BoG data).
• Levies ALWAYS trickle down to consumers. Diesel and petrol prices will rise, hurting transport, food costs, and businesses.
• Ghanaians are already taxed to death: VAT, COVID levy, now this?
IERPP’s proposed solution:
• Cut government waste (e.g., luxury cars, bloated appointees).
• Recover stolen funds (e.g., Agyapa deal, COVID funds scandal).
5. “Balancing stability & sustainability” – A false choice
Government Claim: The levy is needed to “balance” power stability and finances.
The Truth:
• This is not balance—it’s extortion.
• Why must citizens pay for government failures?
• Where is the long-term plan? Just more taxes, no reforms.
IERPP’s proposed solution:
• Public-private partnerships for energy investments.
• Transparent, competitive bidding for power projects.
IERPP is in support of the Minister of Finance position and urges the Minister NOT change his position during his vetting time “that Ghana doesn’t need new taxes”.
Instead of burdening citizens with another fuel levy, Ghana should pursue sustainable alternatives: First, recover the $3 billion lost to corruption by prosecuting offenders and reclaiming stolen assets.
Second, slash government waste – from bloated ministries to extravagant presidential spending.
Third, boost local production through tax incentives to reduce costly fuel imports. Fourth, accelerate renewable energy investments in solar and wind to achieve long-term cost savings.
Finally, crack down on the $1 billion lost annually to smuggling by strengthening border controls.
These measures would generate revenue without punishing Ghanaians who are already struggling with economic hardship.
The solutions exist – what’s missing is the political will to implement them.
Author:
Prof. Isaac Boadi
Dean, Faculty of Accounting and Finance, UPSA
Executive Director, Institute of Economic and Research Policy, IERPP
