Deloitte warns energy sector remains major fiscal threat despite macroeconomic gains

While Ghana has made significant strides in restoring macroeconomic stability, the energy sector continues to pose a “significant fiscal risk” to the national economy, according to a new assessment from professional services firm Deloitte.

In its analysis of the government’s 2026 Mid-Year Budget Review, Deloitte acknowledged the administration’s progress in stabilizing the economy but cautioned that the financial health of state-owned enterprises—particularly the Electricity Company of Ghana (ECG)—remains a critical vulnerability.

Energy Sector Reforms Urged

Deloitte noted that while the Mid-Year Review correctly identifies the energy sector as a reform priority, the financial losses currently accumulating within the sector could eventually migrate onto the government’s balance sheet. The firm warned that without “meaningful reforms,” these losses threaten to undermine the hard-won gains made in debt sustainability over the past two years.

“Losses within the sector could eventually migrate onto the government’s balance sheet and undermine hard-won gains in debt sustainability,” Deloitte stated, urging the government to pursue energy sector reforms with both urgency and consistency.

Debt Restructuring and SOE Liabilities

Although Ghana’s sovereign debt restructuring is nearing completion, Deloitte highlighted that liabilities within the energy sector—particularly those associated with state-owned enterprises (SOEs)—remain a persistent source of concern. The firm welcomed the Finance Minister’s commitment to strengthening public financial management controls and enforcing stricter commitment authorization procedures, describing these moves as “welcome” steps toward mitigating fiscal exposure.

Fiscal Consolidation and Debt Service Gains

The Mid-Year Review largely preserves the fiscal consolidation framework established in the 2025 Budget and the 2026 Budget Statement, with debt sustainability remaining a cornerstone of economic policy. Deloitte pointed to a notable improvement in debt service costs relative to government revenue as a key positive development.

According to the firm, debt service as a proportion of domestic revenue fell from 55.7% in 2022 to 28.6% by mid-2026. This reduction, Deloitte noted, signals that a smaller share of government revenue is now being consumed by debt servicing, thereby creating much-needed fiscal space for investment in health, education, and infrastructure.

Caution on Domestic Borrowing

Despite these positive indicators, Deloitte urged the government to avoid excessive reliance on short-term domestic debt. The firm warned that such a strategy could increase refinancing risks and drive up interest costs, potentially reversing the current trajectory of fiscal improvement.

“While domestic borrowing remains an important source of financing, the government should continue to avoid excessive reliance on short-term domestic debt, which can increase refinancing risks and interest costs,” Deloitte advised.

Conclusion: Progress with Persistent Risks

Taken together, Deloitte acknowledged that the indicators point to an economy that has made substantial progress since the debt crisis of recent years. However, the firm cautioned that vigilance is required to sustain these gains, emphasizing that the energy sector remains the single largest threat to long-term fiscal stability.

As Ghana continues its recovery, Deloitte’s assessment underscores the need for disciplined implementation of reforms—not only to protect the balance sheet but also to ensure that the country’s macroeconomic progress is not undone by lingering inefficiencies in the energy sector.

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