World Bank supports energy sector amid economic challenges

The World Bank has pledged ongoing support to address the country’s deteriorating energy sector, particularly the power sub-sector where huge losses are a recurring theme.

Anna Bjerde, the World Bank’s Managing Director for Operations, during a visit to Accra, stressed the need for comprehensive measures to prevent further losses and ensure a consistent electricity supply, if the country is to recover from the ongoing economic difficulties it faces.

She explained that the bank sees an efficient energy sector as key to economic recovery, providing much-needed electricity to power industries and invigorating economic activity.

Currently, the energy sector’s financial performance is a source of concern for government – with most state-owned entities along the value chain recording sustained losses. However, by working with government, the World Bank aims to assist with metering, billing and revenue collection in a bid to bring about greater efficiency.

In the past years, government has tried to address the sector’s debts through the Energy Sector Levy Act (ESLA) and others. Despite this, it is projected that without additional measures, energy sector-related debt could escalate to US$12.5million by end of 2023.

For instance, a recent industry report highlights that the power distribution sector’s increasing commercial losses are a significant contributory factor to ongoing debt accumulation in the sector. The primary causes of these commercial losses are the prevalence of illegal meters in the national grid system, non-payment for consumed power, power theft through illegal connections and ineffective revenue collection.

As a result of these issues, electricity distribution losses for the first quarter of 2020 amounted to 26.63 percent, with technical losses accounting for approximately 10 percent and commercial loss making up 16.63 percent. The Electricity Company of Ghana (ECG) reports that power-theft alone leads to an estimated annual loss of about US$418.2million.

During her three-day visit to Ghana – the first to an African country since taking office in April, Ms. Bjerde shared her concerns with the media stating: “Ghana’s problems are serious and not unique. Urgent action is necessary to correct the situation and prevent further financial and network losses, which could lead to economic hardships for the population”.

The World Bank will provide technical advice on metering, billing and collection systems, helping government address issues efficiently. Additionally, the Bank will offer guidance on social protection measures to ensure vulnerable populations are shielded from tariff adjustments.

Pierre LaPorte, World Bank Country Director for Ghana, reiterated the institution’s commitment to supporting the country during these challenging times. “Ghana’s portfolio with the World Bank is performing well compared to other countries in the region, with commitments of US$3.6billion. Several projects are in the pipeline – including budget support operations, financial sector support and youth employment programmes,” LaPorte added.

Recognising the country’s potential to become a regional energy hub, the World Bank sees opportunities in transitioning to renewable energy – which could stimulate growth and local manufacturing capacity. Excess energy could also be exported to neighbouring countries through the West African power pool and other interconnections.

Ms. Bjerde emphasised the importance of continued collaboration between the World Bank and Ghana to effectively address current challenges. She reaffirmed the institution’s commitment to supporting the country during both favourable and difficult times.

“Our longstanding partnership with Ghana aims to provide necessary support for the country’s economy to rebound. We are dedicated to fostering an environment that encourages creativity and innovation, especially in the energy sector,” Bjerde said.

The World Bank’s efforts extend beyond immediate financial assistance and technical guidance. The institution aims to work closely with government to implement a comprehensive energy action plan, ensuring the sector contributes positively to the country’s economy.

During her visit, Ms. Bjerde engaged with Ghanaian authorities, including President Akufo-Addo, discussing the country’s economic challenges and exploring ways the World Bank can provide support. She also visited World Bank-funded projects including a school initiative and the Ghana Tech and Innovation Lab, which supports young entrepreneurs and their innovative business ideas.

The World Bank’s enduring partnership with Ghana remains crucial during these challenging times. The institution’s evolution roadmap aims to provide specialised support to countries facing economic crises.

As Ghana continues its economic reform journey, collaboration between the World Bank and Ghana aims to help the country rebound, create jobs and unleash its full development potential. Urgent focus on the energy sector will play a key role in ensuring a stable and sustainable energy supply for Ghana’s economic growth and the welfare of its people.

Mr. LaPorte expressed his optimism about the partnership by saying: “The World Bank’s commitment to Ghana is evident in the array of projects we have in the pipeline, spanning various sectors. Our focus is not only on addressing the current challenges but also on fostering sustainable and inclusive growth for the future”.