9491. NRGI Impact: Safeguarding Ghana’s Petroleum Funds and Ensuring a Resilient Recovery
- Author:
- Natural Resource Governance Institute
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- Natural Resource Governance Institute
- Abstract:
- Before the coronavirus pandemic struck Ghana, the country’s economy was relatively strong, with growth forecast at around 5.8 percent in 2020. A month after the country’s first recorded coronavirus case, with both national and global restrictions put in place, the IMF revised this figure down to 1.5 percent. The pandemic also exposed Ghana, with its reliance on mining and oil revenues, to sudden volatility in commodity prices. A significant drop in oil prices caused by the pandemic delayed government plans to increase oil production and reduced expected oil revenues, on which Ghana’s 2020 budget forecasts were built. In order to address short-term needs and raise funds to finance an ambitious coronavirus alleviation program, the government obtained a credit line of $1 billion from the IMF in April 2020, as well as support packages from the World Bank and the African Development Bank. But, with aims to reduce dependence on foreign funds, the government turned its attention to oil revenues to fund the pandemic response. Officials floated plans to free up around $200 million for contingency spending by amending the Petroleum Revenue Management Act (PRMA) to allow the use of the Ghana Heritage Fund and to request a cap on the Ghana Stabilization Fund. These were met with protests. The Ghana Heritage Fund was established to save and invest a portion of oil revenues in safe assets to benefit future generations once oil deposits are depleted. Around nine percent of petroleum revenues flow into this fund annually, which, as of June 2020, held around $608 million in allocations and interest on investments. The Ghana Stabilization Fund was set up to balance the budget in times of shocks to the economy and unanticipated shortfalls in oil revenues. The minister of finance, subject to parliamentary approval, can cap accruals to the fund. Excess funds above the cap can then be used for debt servicing or for contingency spending.
- Topic:
- Natural Resources, COVID-19, and Revenue Management
- Political Geography:
- Africa and Ghana