Ghana’s energy sector reform: World Bank approves $260 million loan and grant

The World Bank has approved a $250 million loan from the International Development Association (IDA) and a $10 million grant from the Energy Sector Governance Assistance Program to finance Ghana’s 4-year Power Sector Recovery Program for Results (PforR). This initiative aims to strengthen the financial viability of electricity distribution and expand access to clean cooking solutions in Ghana.

Electricity distribution in Ghana faces significant challenges, including high losses due to low collection rates and tariffs that do not cover costs. These issues have strained the financial and operational performance of energy companies, prompting the Ghanaian government to allocate approximately 2% of its GDP annually to cover the sector’s financial deficits.

Robert Taliercio, World Bank Country Director for Ghana, Liberia and Sierra Leone, highlighted the importance of the program, stating: “Through this important performance-based financing, the World Bank is committed to supporting the recovery of Ghana’s energy sector and its financial sustainability. The operation aims to strengthen revenue collection and improve the quality of energy supply through investments in prepaid meters and in commercial and metering management systems in distribution companies.

PforR will complement ongoing regulatory and policy reforms in Ghana’s energy sector. These reforms are supported by the World Bank’s Development Policy Finance Series and the ongoing IMF Extended Credit Facility program for Ghana. The focus will be on increasing institutional capacity and accountability and providing financing directly to utilities through capital spending programs.

Dhruva Sahai, Program Leader for Infrastructure, highlighted the program’s objectives, saying: “PforR aims to reduce the cost of electricity service delivery by improving the economic utilization of generation capacity and by strengthening the commercial and operational performance of distribution companies.”

An important element of the program is the Clean Cooking Initiative, which aims to increase access to liquefied petroleum gas (LPG) for households, schools and enterprises. PforR will offer grants for stoves and accessories – excluding cylinders – to first-time home users, commercial caterers and secondary schools. This initiative aims to increase women’s access to clean cooking solutions, reduce health risks from smoke exposure, and improve women’s economic opportunities.

The International Development Association (IDA), founded in 1960, makes a key contribution to the world’s poorest countries by providing grants and low- or zero-interest loans for projects that stimulate economic growth, reduce poverty and improve living conditions. Since its inception, IDA has provided $458 billion to 114 countries, with a significant portion of these resources going to African nations.

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