By: Stephen Yeboah (stephenyeboah110@yahoo.com)

The World Bank in 2009 approved a loan to a total of US$535 million to support three main credit facilities. That is, the Natural Resources and Environmental Governance Development Policy Operation (US$10 million); A Transport Sector Project (US$225 million); and a fast track Economic Governance and Poverty Reduction Credit (US$300 million). This loan, according Eurodad research, has a total of 57 conditions attached, including both binding conditions and benchmarks. How do you expect a country grappling with 57 “comprehensive” conditions stretching across almost all sectors of the economy to have the leeway to determine its policies towards combating poverty? Is Ghana at all a sovereign state as we regard it?

What is significant and worthy of consideration is not essentially the multiplicity of conditions, but the fact that 12 out of the 57 conditions are not made explicitly clear in the loan agreement through the Letter of Development Policy (LDP) signed in June, 2009 by the Government of Ghana to the World Bank. This, according to the research by Nora Honkaniemi of the European Network on Debt & Development (Eurodad), allows the details of the conditions upon which the loan is agreed to be explicitly left out of the loan document and spelled out in this side letter.

In essence, apart from the fact that the World Bank, through the loan, has dictated the pathway for the economy, transparency has been totally neglected. This is in sharp contravention of the principles of responsible financing as detailed in the Eurodad Charter, which states that "all details in relation to the loan must be contained within one document. Side letters are not permitted" (making reference from Nora Honkaniemi’s briefing report titled “Conditionality in World Bank crisis-lending to Ghana”). It is utterly surprising that an institution like the World Bank that openly champions support for transparency, especially in the extractive sector, is itself embroiled in a quagmire of secret deals.

GHANA’S OIL AND WORLD BANK LOAN

It may seem outrageous to consider how the financial package approved by the World Bank Group last year would have a link with the country’s emerging oil and gas industry. There is, however, a direct link and the reasons are not far-fetched.

The emerging oil and gas sector is not left out of the flood of conditions attached to the International Development Association (IDA), the World Bank's concessional lending arm, loan to Ghana. It is stated that the main set of loan conditions as under the LDP (11 out of 57) apply to the energy and extractive sectors such as gas, mining, gold, forests and oil. This apparently means that already the fiscal regime in the oil sector has been meddled with much external influence. In the briefing report by Nora Honkaniemi already alluded to above, “conditions in these sectors stipulate how the resources should be managed and how the government should tax profits, including the implementation of an oil and gas fiscal regime and the requirement to adjust the taxation of timber, fisheries, mining products, and oil and gas”. It is also made known that the conditions attached to the 2009 World Bank loans require the Ghanaian government to establish a fiscal regime to tax the income and profits of the companies that will extract the oil.

The genesis of all the controversies that has shrouded the World Bank Group’s financing scheme in the country can be traced to the International Finance Corporation (IFC)’s approval of loans totaling US$215 million to Kosmos Energy and Tullow Oil for the exploitation of the oil and gas reserves. IFC, private sector lending arm of the World Bank, approved the loans in 2009 at a time when the civil society had already raised concerns about the legitimacy of the financing strategy. The concerns were that the Environmental Impact Assessment of the Jubilee Oil field had not been approved by the Environmental Protection Agency (EPA) in Ghana. Another concern was that "Kosmos Energy Ghana HC is indirectly wholly owned by Kosmos Energy Holdings, a privately-held Cayman Island company". Defying all odds, IFC went ahead to approve the loan facility to the oil companies.

Now, let us get down to brass tacks. It is not wrong for the World Bank to advise the government to establish a fiscal regime to tax the income and profits by the companies that will extract the oil in the Jubilee Field. The issue that needs addressing is how World Bank has imposed and dictated actual strategies of resource management and how the country could derive maximum fiscal benefits from the oil sector without due consideration of home-grown strategies. Indeed, there are two basic issues that apparently expose the World Bank’s attitude smacking of double-standards and further confirm the perception that it does not legitimately seek the interest of developing countries.

POSSIBLE RAMIFICATIONS

In the first instance, it is not far from right to say that the government of the day is actually undertaking reforms in the oil sector in conformity with World Bank’s already laid down fiscal policies. Shouldn’t the World Bank at least allow the government the luxury of time to determine her own fiscal regime? Should Ghana be told to tax oil companies before it does so? There is every reason to believe that the preparation of the revenue management bill is in congruent with World Bank’s already established benchmarks. The unusually high levels of external intervention in the oil industry will not produce the kind of results the country seeks.

The last issue has to do with the unacceptable strategy of pushing conditionalities through the side door. The World Bank Group and other major international financial institutions (IFIs) including the IMF and European Bank for Reconstruction and Development (EBRD) are known to be instigating and ramping up support for the Extractive Industries Transparency Initiative (EITI). Apart from this, on July 1 2010, the World Bank Group gladly announced a new policy of openness and transparency by way of access to information. It is therefore worrying if an institution like the World Bank is engaged in a practice that does not only promote unwarranted secrecy but have grave consequences to the economic growth of Ghana. The open declaration of the country to transparency in the extractive sector can see no further improvement especially in the oil sector when fiscal policies have been subjected to gruesome opacity. Ideally, the 12 hidden conditions could suggest that provisions enshrined are not of national interest and that Ghana continues to condone practices that raise doubts of her good governance efforts. We are witnessing a double display of activities in financial circles. The same institution that approved loans for oil companies (Kosmos Energy and Tullow Oil) operating in the Jubilee Oil field, through its private sector lending arm, is also proposing how these same oil companies should be taxed. Considering the clear experience of unfavourable mutations that has accompanied international financial package in other sectors of the economy including the public sector, the trajectory of decisions should best be left to local governments rather than being dictated to.

With few months left for f irst oil to be pumped, the burning question to pose is, how prepared is Ghana in managing her budding oil revenues. It is right to say that the purported drive into a successful oil producing economy is being steered by the World Bank with its conditions pushed through the side windows as stipulated in the Letter of Development Policy. That Canada, Brazil and Norway are successful oil economies today did not come through a spell but through adherence to time-tested home grown policies that fit well the jurisdiction and capacity of local institutions. It would not be much surprising if the World Bank has indicated how Ghana should use her budding oil revenues. The World Bank is on Ghana’s oil and its influence has taken a new shape and dimension. So, who will drive the oil economy? CONCLUSION In conclusion, whether or not the fiscal policies being pushed through the side door of the economy by the World Bank will serve the interest of Ghana is another issue all together. Even with the unprecedented passage by the US Congress of transparency reforms in addition to the voluntary EITI, the actions of the World Bank clearly give an indication that open declaration to transparency initiatives is just not enough to end secrecy in business deals. This reveals how important an enlightened citizenry and empowered civil society front would be in pushing for a complete public oversight. It should be known that even with the alarming prospects staring the country’s petroleum sector in the face, arriving at a resource-efficient economy, will not be easy. Being able to avoid the impacts of the catchall phrase - the resource curse - goes far beyond verbal commitments to transparency. Ghana rather needs to take practical steps to ensure transparency in the oil and gas industry. On a simple premise, a complex global oil game is afoot in Ghana. This is the game when apart from the plethora of interests of National oil Companies and the host State, IFI, through their financial packages, leverage much authority on developing oil resources. The country ought to be on the qui vive.