Heritage Fund least prioritized oil revenue beneficiary

Ghana’s oil revenue inflow into the Heritage Fund in nine years, from 2011 to June 2019 is valued at US$464.26 million being the lowest among the three beneficiary funds from petroleum revenues a report by SEND Ghana has confirmed. While this is in line with the proportionate allocations established by law, public policy analysts are now questioning the lack of priority being given by the State to savings from oil revenues being reserved for future generations to use when Ghana’s oil resources eventually run out.

Their worry is that even with the overwhelming largest portion of oil revenues being spent currently, Ghana’s fiscal position is precarious; indicating that when those revenues stop coming the country’s public finances may become completely unsustainable, because not enough is being saved towards that time.

Perhaps even more worrying is that since the Jubilee oilfield was discovered in 2007, Ghana has been borrowing inordinately from the international capital market – the first Eurobond issuance of US$750 million came barely months after the first commercial oil find was announced – relying on future oil revenues to repay the debts. Analysts now worry that with the low level of savings into the Heritage Fund, Ghana would not be able to meet its external debt obligations after oil revenues stop flowing in, creating an untenable situation for future generations which the Heritage Fund was designed to protect.

The nation’s Petroleum Revenue Management Act (PRMA) 2011, established the Ghana Heritage Fund to save oil revenues for future generations of Ghanaians, yet Send Ghana has expressed worry about the little resources the fund has accrued since its inception.

Meanwhile, the Stabilization Fund within the same period, accrued US$1.104 billion.

The Stabilization Fund which, is set aside to mitigate the negative effects of oil revenue volatility on the national budget and sustain public expenditure capacity in the unanticipated event of a revenue shortfall has been prioritized in allocation of oil revenues.

Out of the US$5.1 billion revenue accrued from oil revenue since production began in 2011 till June this year, allocations to Ghana National Petroleum Corporation totalled US$1.587 billion with the Annual Budget Funding Amount, the third fund established by the PRMA since 2011 also receiving US$2 billion.

Speaking at a national stakeholders forum to present findings on the Annual Budget Funding Amount on oil revenue management and allocations, Senior Programme Officer of SEND Ghana explained that greater priority must be given to allocations that concerns critical sectors including agriculture, education and health.

The findings also recommended that the bureaucracy around request and approval channels for project funds from the Finance Ministry should be shortened or processes accelerated so that funds are released timely.

The Ministry of Finance must institute deadlines for ABFA request and approval, ensure its adherence and sanctions.

The study also sought to monitor real time disbursements and utilization of the ABFA in 2018 and the first six months of 2019.