Ghana's energy and roads construction sectors exhibit significant financial and procurement weaknesses, according to a new International Monetary Fund (IMF) Technical Assistance Report. These breaches of public financial management rules expose the government to additional fiscal risks.
The report found that more than 15% of payables and 6.4% of procurement commitments in these two critical sectors violated public financial management regulations. Specifically, the Electricity Company of Ghana (ECG) acquired electricity meters valued at approximately US$145 million through 50 contracts without complying with the Public Procurement Act. This highlights a systemic issue within state-owned enterprises (SOEs).
This finding fits into a broader pattern of fiscal challenges and governance concerns within Ghana's SOE landscape. The IMF has consistently warned about the financial burden posed by SOEs, with liabilities accumulating to significant amounts. For instance, ECG alone accounts for GHS 71 billion of these liabilities. Such irregularities undermine efforts to stabilize the economy and reduce public debt, which is a key objective of Ghana's current IMF-supported programme. The government has been implementing reforms to improve SOE performance, but these efforts have yet to yield consistent positive results.
The IMF report explicitly states that stronger oversight of SOE procurement, contracts, and financial commitments is essential. It argues this oversight will contain fiscal risks and ensure state-owned entities operate within public financial management and statutory requirements. The Ghana Audit Service performance audit provided key evidence for these findings.
Ghanaian authorities must now address these procurement and financial lapses to prevent further fiscal strain. Decision-makers will need to implement stricter enforcement of the Public Procurement Act and enhance accountability mechanisms within SOEs. Investors and financial markets will closely watch the government's response, as continued weaknesses could impact confidence and the cost of borrowing. Effective reforms are crucial for Ghana's long-term economic stability and fiscal health, ensuring public funds are used efficiently and transparently.
The report also raised concerns about unsolicited “take-or-pay” Power Purchase Agreements within the energy sector. These agreements have led to generation capacity exceeding actual national demand. Such arrangements create ongoing financial obligations that continue to pressure the energy sector and overall public finances. Addressing these legacy contracts is another critical step for the government. This will help to reduce the financial burden on the state and improve the operational efficiency of the energy sector. The focus must be on preventing similar issues in future contracts.