As lottery destroys the poor, oil could destroy Ghana’s economy – American governance expert
In the absence of strong institutions, Ghana’s discovering of oil will eventually destroy the economy just as winning a lottery often destroys the poor, an American governance expert has predicted.
Painting a picture of oil’s destructive powers to an economy, Professor Larry Diamond said oil exposes a country’s weak institutions, teases and tempts a country’s leaders to become “massively corrupt”.
Ghana began commercial production of oil three years ago. Government has said revenue from Ghana’s oil would be focused on expenditure and amortization of loans for oil and gas infrastructure; road and infrastructure; agric modernization and capacity building.
To regulate the industry and ensure greater transparency, Parliament has passed the Petroleum Revenue Management Act, Petroleum Commission Act, Petroleum Exploration and Production Law, Petroleum Income Tax Law, National Petroleum Authority Act among several others.
Others in the offing include the Local Content and Local Participation Policy Framework, the Right to Information Bill, the Marine Pollution Bill and the Ghana Extractive Industries Transparency Initiative (EITI) Framework.
But despite these laws, the overall score for transparency in the industry in the country was measured at 59.7 per cent, with transparency in oil and gas funds recording even a lower average score of 44 per cent, according to the Institute of Economic Affairs (IEA) Petroleum Transparency and Accountability Index.
There is no constitutional mandate for institutions such as the Ministry of Energy, the Ghana National Petroleum Corporation (GNPC) and the Ghana Revenue Authority (GRA) to publish information on the industry, including prices, volumes, production costs and taxes, on their websites.
The focus of oil revenue on road has also been criticised as too wide with revenue spent thinly across several roads. For instance, $24 million was spread over 64 road projects, covering 2,124 kilometers.
Professor Diamond, a senior fellow at Hoover Institution and Freeman Spogli Institute for International Studies, who is in the country to deliver a lecture on oil windfall, said the only way to ensure Ghanaians benefit from its oil find is “radical transparency” in the sector.
He said unlike Nigeria, Ghana has better governance structure and a higher per capita income than Nigeria.
But he called for the oil sector to be “insulated” from politicians, and institution of stronger auditing and monitoring structures.
The sudden discovery of oil often activates a mad rush for money, a new zeal for lavish spending and borrowing until the country is obese under debt, corrupt at the top and choking in poverty, the governance expert has warned.
In view of oil revenue windfalls, he warned against excessive borrowing and impulsive public spending.
It is also worth noting the rise in public debt from 43% of GDP in 2011 to 48% in 2012, and further to 53.5% in September 2013, resulting from a widened budget deficit.
Public expenditure overran in 2012, marked by an unprecedented budget deficit of around 12% of GDP. Story by Ghana|Myjoyonline.com|Edwin Appiah|[email protected]
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