Introduction

In a significant update regarding the health of Ghana’s power sector, Presidential Spokesperson Felix Kwakye Ofosu has highlighted the pivotal role of the GH¢1.00 Fuel Levy in stabilizing the nation’s energy economy. Speaking at the 2026 maiden Government Accountability Series Press Conference in Accra, Mr. Kwakye Ofosu detailed how the implementation of this levy is systematically addressing the massive indebtedness plaguing the energy sector.

Often referred to colloquially as the “D-Levy,” this tax is formally part of the Energy Sector Levies (Amendment) Act, 2025 (Act 1141). It was introduced to bridge critical funding gaps, specifically targeting the cost of liquid fuels used to power thermal electricity plants. This article provides a comprehensive analysis of how this policy instrument is being utilized to clear historical debts, ensure fuel availability, and guarantee a stable power supply for Ghanaians.

Key Points

Background

For years, Ghana’s energy sector has struggled with a complex web of financial obligations, often described as a “circular debt” problem. A major component of this crisis was the funding of liquid fuels—primarily crude oil and refined products—required to run the country’s thermal power generation plants.

The “Fuel Procurement Gap”

Historically, the cost of these fuels was not fully factored into the electricity tariffs billed to consumers. This created a massive funding shortfall, often referred to as the “take-or-pay” liabilities, where the government was contractually obligated to pay power producers even if electricity was not dispatched. By 2025, this had resulted in billions of dollars in arrears, threatening the operations of IPPs and the stability of the Electricity Company of Ghana (ECG).

Enactment of Act 1141

To combat this, the government passed the Energy Sector Levies (Amendment) Act, 2025. This legislation introduced the GH¢1.00 levy on every litre of petroleum products sold. It is important to note that this is distinct from the Price Stabilization and Recovery Levy; it is a dedicated revenue stream earmarked specifically for the energy sector’s fuel costs and debt servicing.

Analysis

Felix Kwakye Ofosu’s recent statements provide a clear picture of the levy’s effectiveness. The analysis of the energy sector’s turnaround rests on three pillars: cost coverage, debt reduction, and operational discipline.

Bridging the $1.2 Billion Fuel Deficit

The core function of the levy is to address the annual “liquid fuel bill.” Mr. Kwakye Ofosu noted that Ghana requires approximately $1.2 billion annually to import liquid fuels for thermal generation. Without the levy, this amount would either balloon the national debt or necessitate a drastic increase in electricity tariffs, both of which are detrimental to the economy. The levy effectively creates a self-sustaining revenue stream to pay for the fuel used to generate the power the nation consumes.

Clearing the $1.4 Billion Debt

The Presidential Spokesperson confirmed that the Ministry of Finance had cleared about $1.4 billion in energy sector debts. While he clarified that this figure is not the total debt, it represents a “significant chunk” cleared within a single year. This injection of liquidity has provided immense relief to players in the sector, particularly IPPs who had previously faced cash flow crises.

The Discipline of the Cash Waterfall Mechanism

Perhaps the most critical aspect of this analysis is the restoration of the Cash Waterfall Mechanism (CWM). In the past, funds collected for the sector were often disbursed arbitrarily, leaving some IPPs unpaid while others received excess liquidity. The current administration has enforced strict adherence to the CWM, ensuring that every dollar collected from the fuel levy is distributed according to a transparent formula. This ensures that all players—from fuel suppliers to power generators—receive the necessary funds to maintain their operations.

Practical Advice

For consumers, businesses, and stakeholders in the energy market, understanding the implications of the GH¢1 Fuel Levy is essential for financial planning and advocacy.

For Consumers and Households

While the levy contributes to the cost of fuel at the pump, it is vital to recognize its role in preventing higher electricity bills. The stability of the power grid reduces the need for expensive alternative power sources (like generators). Consumers should monitor their electricity usage to ensure they are not over-consuming, as the goal of the policy is to stabilize rates, not necessarily lower them immediately in the face of global fuel price fluctuations.

For Businesses and Industrial Players

Businesses rely heavily on stable power for production. The reduction in “dumsor” (load shedding) means lower operational costs regarding fuel maintenance for backup generators. Industrial players should support the government’s enforcement of the levy, as it directly correlates to the reliability of the national grid which underpins economic productivity.

Monitoring Fiscal Transparency

Citizens and civil society organizations are advised to look out for the annual reports on petroleum receipts submitted by the Ministry of Finance to Parliament. These reports are public documents that detail exactly how much has been collected from the GH¢1 levy and how it has been utilized. Engaging with these reports ensures accountability.

Frequently Asked Questions (FAQ)

What is the GH¢1 Fuel Levy (D-Levy)?

The GH¢1 Fuel Levy is a tax introduced via the Energy Sector Levies (Amendment) Act, 2025 (Act 1141). It adds GH¢1.00 to the price of every litre of petrol and diesel, with the specific purpose of generating revenue to import fuel for thermal power plants and pay off energy sector debts.

Why was the levy necessary?

It was necessary to address a “funding gap” where the cost of fuel for electricity generation was not covered by tariff revenues. This gap had accumulated into billions of dollars in debt, causing fuel shortages and erratic power supply.

Has the levy improved power supply?

Yes. According to government reports, the availability of funds to import fuel and pay IPPs has stabilized the grid. There have been no major load shedding programs reported since the implementation of the levy and the strict enforcement of the Cash Waterfall Mechanism.

Is the GH¢1.4 billion debt clearance the total debt?

No. Felix Kwakye Ofosu clarified that $1.4 billion represents a significant portion of the debt cleared recently, but the government acknowledges there is still more debt to be addressed. The goal is to eventually remove all legacy debts from the books.

Is the Fuel Levy legal?

Yes. It is backed by Act 1141, passed by Parliament. The collection and disbursement are subject to the oversight of the Ministry of Finance and Parliament.

Conclusion

The GH¢1 Fuel Levy represents a strategic, albeit painful, fiscal intervention designed to rescue Ghana’s energy sector from the brink of collapse. By directly linking the cost of fuel importation to a dedicated revenue stream, the government has managed to clear over $1.4 billion in debt and stabilize the national grid.

As articulated by Presidential Spokesperson Kwakye Ofosu, the success of this policy relies on continued discipline in the disbursement of funds through the Cash Waterfall Mechanism. For Ghanaians, the immediate benefit is a reliable power supply, which is fundamental to economic growth and daily life. While the financial burden of the levy is felt at the pump, its utility in preventing a return to crippling power outages makes it a critical component of Ghana’s current energy architecture.