ASEC flags 4 main loopholes in 2026 Budget, warns of dangers to financial steadiness – Life Pulse Daily

Introduction

The Africa Sustainable Energy Centre (ASEC) has issued a stark warning about critical gaps in Ghana’s proposed 2026 National Budget, urging immediate reforms to prevent long-term financial instability. While the government’s 2026 Budget Statement, themed “Resetting for Growth, Jobs, and Economic Transformation,” highlights short-term macroeconomic successes—such as a 35% appreciation of the cedi, a 1.6% GDP surplus, and $250 million saved through debt renegotiations—the sustainable energy expert body argues that these gains rest on precarious foundations. This article examines ASEC’s four key concerns regarding energy sector disparities that risk undermining Ghana’s fiscal progress.

Analysis

Loophole 1: Weak Performance-Based Accountability in Energy Sector Funding

ASEC emphasizes that the government’s allocation of GH¢20 billion to the energy commercial space lacks measurable accountability frameworks. Of this, GH¢15.2 billion targets transmission losses, while GH¢4.8 billion covers debt to Independent Power Producers (IPPs). However, without binding metrics tied to reducing technical (e.g., transformer failures) and industrial losses (e.g., theft or metering inaccuracies), this funding risks becoming an unsustainable “annual band-aid” rather than a catalyst for systemic change. For perspective, ECG’s technical losses alone reached 25% of total electricity generated in 2024, per the Public Utilities Regulatory Commission.

Loophole 2: Risky Diversion of Ghana Petroleum Funds

The Energy Centre criticizes plans to repurpose the Ghana Petroleum Funds—which hold approximately $1.5 billion in foreign exchange reserves—into local energy projects. Currently, these funds act as a stabilizer against global oil price fluctuations and currency volatility. Redirecting them domestically would expose Ghana to budget shortfalls during commodity price slumps and contradict the Funds’ intended sovereignty protection role, as outlined in Ghana’s 1992 Constitution and Petroleum Revenue Management Act.

Loophole 3: Premature Expansion of Thermal Generation Capacity

ASEC flags the proposed 1,200MW state-owned thermal plant as a repeat of Ghana’s 2018 $1.4 billion overspending scandal on the Amonnor Power Plant. The report warns that expanding generation without first addressing grid losses (currently 18% of dispatched energy) and transmission bottlenecks could leave the nation with idle infrastructure and escalating debt. For comparison, Kenya prioritized grid modernization before introducing similar crisis-era projects, achieving a 40% distribution loss reduction by 2023.

Loophole 4: Underutilized Petroleum Revenue Allocations

ASEC highlights the safekeeping of $290 million in U.S. dollars under the Annual Budget Funding Amount (ABFA), with only 0.43% spent by September 2025. This underutilization delays critical projects under the GH¢30 billion “Big Push Programme,” stifles private-sector confidence, and risks economic stagnation. The Funds’ underuse mirrors Nigeria’s 2020 ABFA retention, which contributed to a 2% GDP contraction that year, per Oil, Gas, and Mining Journal.

Summary

ASEC’s analysis identifies four structural vulnerabilities in Ghana’s 2026 Budget: unaccountable energy spending, misappropriated sovereign funds, premature power plant expansion, and underused petroleum reserves. These gaps threaten to negate recent macroeconomic gains and expose the economy to energy-driven fiscal crises.

Key Points

Practical Advice

Tie Energy Funding to Quarterly Performance Targets

Link the GH¢15.2B allocation to ECG’s verifiable quarterly reductions in technical/industrial losses, with penalties for non-compliance.

Accelerate Private Sector Participation

Revamp tariff collection laws and reduce administrative bottlenecks to attract private investment in distribution infrastructure.

Safeguard Ghana Petroleum Funds

Legally codify the Funds’ role as a foreign exchange reserve, as outlined in Ghana’s Petroleum Revenue Management Act, to prevent diversion.

Commission Independent Capacity Assessment

Engage neutral auditors to evaluate the thermal plant’s feasibility before approval, following Kenya’s 2023 energy blueprint model.

Points of Caution

Fiscal Instability at Risk

Without reforms, Ghana could face debt crises akin to Zambia’s 2022 energy bonds, which crumbled amid global downturns, leaving $2.2 billion in losses (World Bank).

Investor Confidence Erosion

Underfunded reforms and fund diversions may trigger $400M+ capital flight from Ghana’s energy sector, akin to Angola’s 2019 IPP buyout collapse.

Legal Implications

While no direct legal infractions are cited, repurposing sovereign funds could violate Article 184 of Ghana’s 1992 Constitution, which mandates transparent management of public revenues. Additionally, the 2016 Petroleum Revenue Management Law prohibits using Funds for non-petroleum projects without parliamentary approval.

Comparison

Contrast Ghana’s approach with Côte d’Ivoire’s 2018 energy reforms, which combined budget transparency with a $5B private-sector modernization fund, achieving a 22% loss reduction in 2022. Ghana’s lack of performance-linked funding contrasts sharply with Zambia’s 2020 debt restructuring, which prioritized utility revenue guarantees.

Conclusion

ASEC’s warnings underscore an urgent need for Ghana to address systemic energy sector inefficiencies. Without accountability mechanisms, prudent use of sovereign resources, and evidence-based infrastructure priorities, the nation risks squandering its 2026 macroeconomic gains. Immediate alignment of fiscal policy with long-term sustainability goals is critical to avoid energy-driven economic downturns.

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