1 litre, GH¢1: New fuel levy looms as Finance Minister submits request to Parliament

Finance Minister Dr. Cassiel Ato Forson has stirred controversy in Parliament. He introduced the Energy Sector Levy Amendment Bill urgently. This bill aims to impose new taxes on petroleum products.

If approved, the bill will create fresh taxes on all petroleum products. Dr. Forson stated this is necessary to address a US$3.1 billion energy debt by March 2025.

He assured Parliament that consumers would not feel immediate impacts at the pumps. This is due to the strong performance of the Ghana Cedi.

Dr. Forson detailed the financial troubles in the energy sector. The US$3.1 billion debt includes significant arrears owed to Independent Power Producers (IPPs) and State-Owned Enterprises (SOEs). It also includes debts to crucial fuel suppliers.

A major issue is non-payment of bills to key power providers like ENI and Karpowership. This situation led to a complete drawdown of a US$512 million World Bank guarantee and a US$120 million GNPC guarantee in 2024. The government now needs an additional US$632 million for these guarantees.

To raise revenue for the power sector, Dr. Forson proposed increasing ex-pump prices for petrol and diesel. However, he quickly reassured consumers about cost increases.

He emphasized that gains from a strong Ghana Cedi would absorb any impact on prices. "Consumers will not have to pay extra for petrol and diesel starting today," he said.

Dr. Forson added that simulations show no increase in ex-pump prices if the levy is imposed due to the strong Cedi performance.

The new levy aims to provide dedicated funding for the struggling power sector. Proceeds will be used specifically for procuring essential fuel needed for consistent power generation.

This funding is crucial for ensuring stable electricity supply in Ghana, as current tariffs do not cover fuel costs used in power generation.

According to Dr. Forson, implementing this levy represents a balance between reliable power supply and long-term financial sustainability of Ghana's energy sector.