Dumsor Levy: A necessary intervention for Ghana’s energy future – Nsemkeka
At a time when fiscal prudence, macroeconomic recovery, and energy security are all in delicate balance, the government’s decision to increase the Energy Sector Recovery Levy (ESLA) by GH¢1 per litre deserves more than a cursory political response, it requires sober, data-driven analysis.
While any tax or levy increase warrants scrutiny, this policy move, passed under a certificate of urgency by Parliament, represents a strategic and necessary intervention. It comes as Ghana’s energy sector grapples with a staggering US$3.1 billion in legacy debt, plus an additional US$1.8 billion needed for imminent fuel procurement. This burden, if left unaddressed, could plunge the country back into prolonged power outages and crippled productivity, scenarios the nation cannot afford.
The new levy is projected to generate GH¢5.7 billion annually, which will be ring-fenced, meaning it will not enter the Consolidated Fund but instead be used solely to settle energy debts, finance fuel purchases, and avert future energy crises. This structure ensures greater transparency, fiscal discipline, and purpose-driven disbursement.
A Balanced Fiscal Shift
This increment does not occur in a vacuum. It is part of a broader rebalancing of the country’s tax architecture. The Mahama-led government has already repealed several regressive and economically burdensome taxes, including:
• The E-Levy, which was widely unpopular and hit low-income earners and mobile money users the hardest;
• The Betting Tax, which disproportionately impacted the youth and digital entrepreneurs;
These repeals represent significant relief for ordinary Ghanaians, and they more than offset the new GH¢1 levy, which is carefully targeted and will serve a productive national cause.
Timing Is Everything
Critically, the ESLA increase has been introduced at a time when macro-conditions favor its implementation:
• The Ghana cedi has appreciated significantly, reducing the cost of imported fuel;
• World market prices for crude oil have dropped, compared to the 2022–2023 crisis era;
• Fuel prices at the pump are stable, currently averaging GH¢11–GH¢13 per litre, far lower than the GH¢23 per litre recorded under the Akufo-Addo/Bawumia administration at peak times.
These dynamics mean that the GH¢1 increase will not lead to an immediate or drastic rise in fuel prices, a fact acknowledged by the President and confirmed by market trends.
A Path to Energy Self-Reliance
Importantly, the levy is not a permanent burden. It is a transition tool, helping Ghana move from dependence on expensive liquid fuels to a gas-dominant energy system. With increased production from the ENI Sankofa, Jubilee, and TEN fields, and additional supply expected from the West African Gas Pipeline, Ghana can gradually shift its energy mix, reducing procurement costs and freeing ESLA revenue for faster debt repayment.
The benefits of this transition are profound:
• Reliable power supply for industries, schools, hospitals, and households;
• Improved creditworthiness of energy utilities like ECG and GRIDCo;
• Restored investor confidence in Ghana’s energy landscape.
Ensuring Accountability and Reform
For this policy to succeed, the government must accompany it with bold, transparent, and measurable reforms, including:
• Establishing a multistakeholder oversight committee to monitor the use of ESLA funds;
• Publishing quarterly audited reports on fund allocation and impact;
• Accelerating investment in gas infrastructure and storage;
• Reviewing and renegotiating unsustainable power purchase agreements (PPAs);
• Addressing distribution inefficiencies, including ECG’s 25% commercial losses;
• Expanding lifeline tariff programs to cushion low-income households.
A Difficult, But Right Call
The ESLA levy increase is a difficult political decision, but also a courageous and economically sound one. It reflects a willingness to confront hard truths rather than postpone structural fixes. Ghanaians are being asked to contribute not to a vague budget line, but to a specific national recovery goal: a stable, sustainable, and debt-free power supply.
Energy is the engine of every modern economy. Ghana cannot industrialise, digitalise, or export competitively if its power sector is insolvent and unstable. This levy may well be the bridge between today’s challenges and tomorrow’s prosperity.
Let us demand transparency. Let us hold the government accountable. But let us also recognise the importance of shared sacrifice for shared stability.
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The writer, Richmond Eduku, is a finance and energy policy analyst