Mahama Government Clears US$1.47 Billion Legacy Energy Sector Debt
The Government of Ghana, under the leadership of President John Dramani Mahama, has successfully cleared a US$1.47 billion legacy debt in the energy sector, marking a significant milestone in the country’s efforts to restore stability and confidence in power generation and supply.
The debt clearance, completed within the 2025 fiscal year, addresses long-standing arrears accumulated over several years, which had weighed heavily on the energy value chain, disrupted operations, and weakened investor confidence. Government officials describe the intervention as a decisive reset aimed at strengthening the financial foundations of the sector.
Breakdown of the Debt Settlement
According to the Ministry of Finance, the US$1.47 billion payment covered three major components of legacy obligations within the energy sector.
Restoration of the World Bank Partial Risk Guarantee
A major portion of the settlement involved the full repayment of US$597.15 million, including interest, drawn from the World Bank Partial Risk Guarantee facility linked to the Sankofa Gas Project. This facility had been fully depleted due to prolonged non-payment for gas supplies in previous years.
The repayment has fully restored the guarantee, reopening access to international risk-mitigation instruments and reaffirming Ghana’s credibility with development partners and private investors.
Settlement of Outstanding Gas Supply Invoices
The government also settled all outstanding gas supply invoices owed to upstream gas suppliers for fuel delivered to power plants. These payments, amounting to approximately US$480 million, have ensured that Ghana is current on its gas obligations and has stabilised fuel supply arrangements for electricity generation.
This step is expected to reduce reliance on expensive liquid fuels and enhance efficiency in power production.
Clearance of Independent Power Producer Debts
An additional US$393 million was paid to Independent Power Producers (IPPs) after successful renegotiation of power purchase agreements to ensure better value for money and long-term sustainability.
The payments covered legacy arrears owed to several power generation companies, many of which had endured years of delayed payments, affecting their ability to maintain operations and expand capacity.
Impact on Ghana’s Energy Sector
The clearance of the legacy debt removes one of the most persistent financial risks facing Ghana’s power sector. For years, mounting arrears had constrained generation capacity, increased operational costs, and discouraged new investment.
With these obligations now settled, the sector is expected to experience:
Improved liquidity across the energy value chain
Increased investor confidence and renewed private sector participation
More reliable electricity generation and supply
Stronger fiscal discipline and payment certainty
Government has also introduced enhanced budgetary controls and cash-management systems to prevent the re-accumulation of energy sector arrears.
Broader Economic Significance
Energy sector debt has long been recognised as a major threat to Ghana’s macroeconomic stability. By resolving these legacy liabilities, the Mahama administration aims to create a more predictable and sustainable environment for economic growth, industrial expansion, and job creation.
Industry analysts describe the move as a strategic intervention that strengthens Ghana’s position as a reliable destination for energy investment while supporting long-term development goals.
The Way Forward
While challenges remain, the successful clearance of the US$1.47 billion energy sector debt represents a critical turning point. With improved financial discipline, renegotiated contracts, and restored confidence, the sector is better positioned to support national development and economic transformation.
As government continues to implement reforms across the economy, the reset of the energy sector stands out as a major achievement with far-reaching implications for Ghana’s future.