Ghana’s GHC1 Fuel Levy: CERPA Evaluates What It Means for Ghana’s Energy Future

3d ago | Source: Dennis Obeng-Adjei Opare

The Centre for Economic Research and Policy Analysis (CERPA) has released a new policy paper examining Ghana’s recently introduced GHC1 fuel levy. The paper explores the levy’s capacity to help address the country’s growing energy sector debt, its likely effects on citizens, and the complementary reforms needed to make it work.

Ghana’s energy sector faces a legacy debt of US$3.1 billion, largely due to years of underpricing, take-or-pay contracts, operational inefficiencies, and exchange rate losses. The new levy – introduced in early June 2025 and expected to raise GHC5.7 billion annually – is intended to reduce this burden. However, CERPA’s analysis shows that clearing the debt could take nearly seven years if conditions remain constant and revenues are efficiently collected.

The policy paper identifies several key issues:

The projected revenue from the levy—GHC9 billion by end-2026—is not enough to fully retire the estimated GHC38 billion in total sector debt.
While international oil prices and a stronger cedi have led to lower fuel prices, the levy risks reversing these gains and increasing the cost of living, especially in rural areas.
Stakeholders, including the Ghana Private Road Transport Union (GPRTU), have raised concerns about the impact of the levy on transport costs and household spending.

To ensure a more effective and fair approach, CERPA recommends:

Reducing the levy rate to GHC0.5 per litre to promote affordability and encourage broad compliance.
Diversifying revenue sources by introducing other levies such as carbon, alcohol, and environmental taxes.
Strengthening tax collection systems, including digitised tracking and stronger enforcement.
Exploring the conversion of some energy sector debt into equity holdings for Independent Power Producers (IPPs) to improve performance and reduce liabilities.
Accelerating reforms to improve efficiency in power generation, metering, and financial management across the energy sector.

The full report is accessible here

While the fuel levy may be a step toward restoring fiscal balance in the energy sector, CERPA emphasizes that real progress will require a comprehensive, well-sequenced policy response that considers both the financial and social dimensions of reform. Without broader structural changes, Ghana risks falling into a recurring pattern of debt accumulation and temporary fixes.