The government has asked Parliament to cap the Ghana Stabilisation Fund (GSF) at US$300 million up from its current US$100 million so the excess amount can be used to retire existing debt.
“In line with Section 23(3) of the PRMA, we propose to this august House to cap the Ghana GSF at US$300 million. The reason for the capping is to use the excess amount over the cap to retire existing debt in line with the law,” he said.
The GSF was established under the Petroleum Revenue Management Act, 2011 (Act 815) to provide budgetary support in times of shortfalls in expected petroleum revenues and was later amended to allow excess monies in the fund to be moved into a sinking fund for debt repayment purposes.
The Minister of Finance, Mr Ken Ofori-Atta, made the request when he presented the 2018 Budget Statement and Government Economic Policy to Parliament last Wednesday. The budget is on the theme: “Putting Ghana Back to Work.”
In the 2016 budget, the previous government capped the fund at US$100 million from an initial ceiling of US$250 million reduced to US$150 million.
Stabilisation Fund capped at US$300m
There have been calls by some experts in the oil and gas sector to the government to revisit the original intent of the GSF to provide stability to the annual budget fund amount (ABFA) in order to deal with price volatilities.
They argued that the use of the funds for debt repayment was a clear deviation from the original intent.
In a recent interview, a natural resources management expert at the Ghana Oil and Gas for Inclusive Growth (GOGIG), Mr Samuel Bekoe, said “if you are using the money for debt repayment, then the stabilisation fund function is no more for stabilisation purposes and it cannot tackle expenditure in the medium to long-term,” he said.
Mr Bekoe said there was no need to limit the fund but allow it to grow even though there were competing development demands in terms of budget expenditure and planning and development goals.
“So, what we could do is to allow it to grow for now and if in the medium-term, may be seven to eight years if we have not witnessed any huge price volatility then we can decide whether the interest on it can be spent,” he said.
The Head of the Department of Finance at the School of Business at the University of Cape Coast, Dr John Gartchie Gatsi, said the purpose of the stabilisation fund is to provide a fiscal buffer to the budget in any quarter when there is a significant fall in petroleum revenue which affects the ABFA due to pronounced fall in hydrocarbon prices.
He said although the introduction of the ceiling to the fund beyond which the rest went to the contingency fund, amortisation of loans and sinking fund were all intended to generate a diversified fiscal buffer for the economy, the current limit of US$100million was on the low side.
“We should rather seek an amendment to the law that seeks to restrict the use of discretionary power by the Minister of Finance to determine ceiling on the fund but does not provide guidelines for determining the ceiling,” he said.
He said the capping of the fund by the previous finance minister last year, led to the creation of a contingency fund which has opened a pipeline of buffer financial arrangement for the management of the economy.
Accrued amount to the fund at the end of 2015 was US$177.4 million and in 2014, there was a balance of US$379.19 million. —GB