A civil society group, ISODEC, has proposed an urgent amendment of the Petroleum Revenue Management Act to allow the country invest the petroleum funds locally to boost its economic development.
Mr. Steve Manteaw, Coordinator at Integrated Social Development Centre (ISODEC), explained that the economic rationale for investing the country’s oil revenue in a foreign instrument has not been properly established.
He argued that given the current oil production levels, the country would be better off investing the oil revenue in domestic project than invest the qualifying instrument in a foreign country. “Currently, we are producing at a very low production levels; it would not be viable for us to invest the monies abroad.
“For now, given the returns on investment on the instruments, Ghana will be better off if we invest the money locally.We need to be more prudent and look at better use of our petroleum revenues,” Manteaw said.
Mr. Manteaw said this at a three-day workshop organised by Institute of Financial and Economic Journalists (IFEJ) in collaboration with the GIZ and the Swiss State Secretariat for Economic Affairs (SECO) for 40 journalists drawn from both print and electronic media across the country.
The workshop, held in Elmina in the Central Region, formed part of a series of capacity development initiatives to highlight the benefits of good governance reportage in the extractive sector.
As of now, the Petroleum Revenue Management Act 815 provides a legal framework for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner for the benefit of Ghanaians, in accordance with Article 36 of the 1992 Constitution. It was enacted in 2011.
Proposals for investing the Petroleum Funds — comprising Stabilisation and Heritage Funds — have raised divergent views from civil society groups and government.
The Act stipulates that not less than 90% of the amount in Stabilisation Fund shall be invested in qualifying instruments such as debt instruments, convertible currency deposits, or securities issued or guaranteed by the World Bank, International Bank for Settlement, The European Central Bank or the Central Banks of other sovereign countries with graded security.
More so, not less than 80% of the amount in Heritage Fund shall be invested in qualifying instruments and not more than 20% of the Heritage Fund shall be invested locally in strategic sectors on the basis of commercial needs.
Meanwhile, Dr. Joseph Asensu — Director of Real Sector Division of the Ministry of Finance, in a reaction, disclosed that the law allows the utilisation of the Heritage Fund for 15-years — starting from 2011.
He said the percentages reflect international best practices; that is, investing a greater proportion of petroleum funds abroad.
He said both the Stabilisation and the Heritage Funds, if properly managed, will further generate alternative income streams for future public expenditure.
He said petroleum revenues are not supposed to be treated as another source of income, as they are meant for generational use. “Therefore, it is important to convert these resources into financial capital, and the interest generated can then be utilised for the benefit of future generations.
“However, while Stabilisation Funds have proved useful in smoothing public expenditure, it is purely a stabilisation measure and does not necessarily lead to economic growth and poverty reduction, two important aims of the government policy objectives,” he explained.
According to the government budget statement for 2014, in the first nine months of 2013 crude oil production from the Jubilee Field averaged 102,503 barrels of oil per day (bopd), compared with a projected output of 83,341 bopd and 71,997 bopd in 2012.
This works out to a total of 27,060,737 barrels for January-September 2013, compared with a full-year estimate of 30,419,465 barrels and 26,351,278 barrels for the full-year of 2012.
By end-September 2013, Ghana National Petroleum Corporation (GNPC) had made five liftings on behalf of the State. This totalled 4,977,922 barrels, which resulted in total revenue of US$533.86million.
The Jubilee Field is currently in its second phase of development — the Phase 1A. Work done so far in this phase helped to further increase production to an average level of around 107,000 bopd as of October 2013.
Should production continue at the October 2013 level, the 2013 Jubilee average daily production is anticipated to exceed the 102,503 barrels mark recorded for January-September 2013.
Again total petroleum receipts, including proceeds from Jubilee Field oil lifting by GNPC on behalf of the State as of the end of the third quarter of 2013, was GH¢1,358.18million, compared with a total 2013 Budget estimate of GH¢1,122.72million.
The main reasons for the positive variance of GH¢235.40million were the realisation of more than expected inflows from corporate income tax and increased production.