Energy Sector Levy Not Sustainable under our current economic conditions – Dr. Adu Owusu Sarkodie Warns

Economist and senior lecturer at the University of Ghana, Dr. Adu Owusu Sarkodie, has raised concerns about the sustainability of the proposed Energy Sector Levy, popularly referred to as the “D-Levy,” under Ghana’s current economic conditions and ongoing International Monetary Fund (IMF) program.

Speaking during the sixth edition of CDS Africa’s X Space Dialogue, Dr. Sarkodie described the levy as an unsustainable solution to Ghana’s energy sector debt crisis. The event, organized by the Africa Centre for Democracy and Socioeconomic Development (CDS Africa), featured expert panellists who critically examined the theme: “Energy Sector Levy and Energy Sector Debt: Should It Be Implemented or Repealed?”

According to Dr. Sarkodie, the IMF-supported budget already outlines steps to address the growing energy sector debt and inefficiencies through structural reforms, not additional taxes. “One of the key issues under the IMF program is to resolve energy sector debt and reform the sector to avoid further accumulation of debt,” he stated. “There are inefficiencies in power generation and revenue collection. That is the real source of the problem, not a lack of taxes.”

He questioned the rationale behind introducing a new levy, especially after the government acknowledged in its most recent budget that Ghanaians are overburdened with taxes, leading to the scrapping of certain levies such as the e-levy and the betting tax.

“I was surprised by the introduction of this tax. If we remove other taxes to ease the burden on citizens, only to introduce a new one, then it must be done sustainably and transparently to generate the needed revenue and plug leakages,” he added.

Dr. Sarkodie emphasised that rather than imposing another tax, reforms should focus on efficient tariff collection and revenue generation. He argued that public institutions must be held accountable for their consumption.

“Consumers must pay for the power they use. It should not be that public institutions consume electricity without paying, only for the burden to be shifted to ordinary citizens through fuel levies,” he said.

He also raised critical questions about the equity of the levy, particularly regarding electric vehicle users, who consume electricity but would not be taxed under a fuel-based levy.

“How do you ensure that those using electric vehicles, who also contribute to the energy load, pay their fair share when they don’t use fuel?” he queried.

Dr. Sarkodie concluded that while the D-Levy might offer short-term relief to prevent power outages, it does not offer a long-term solution. He warned that without addressing the underlying inefficiencies in the energy sector, the levy could provoke widespread political resistance.

“The levy does not align with the root of the problem. Trying to stabilise the economy through tariff adjustments while introducing a poorly justified tax risks public backlash. If not handled carefully, we may end up facing the kind of public unrest we’re seeing in Kenya, and Ghana is not ready for that.”

The X Space Dialogue forms part of CDS Africa’s biweekly series designed to stimulate informed public discourse and contribute to evidence-based policy making across critical sectors of governance and development