Heritage Fund for COVID-19 fight: Experts speak against it, provide alternatives
Adnan Adams Mohammed
Some finance and extractive sector experts have called on the government to abort or reconsider its intention to seek for amendment of the Petroleum Revenue Management Act, 2011(ACT 815) as amended to allow it use the Heritage Fund for the COVID-19 emergency expenditure.
Professor John Gatsi, a finance and economics expert is suggesting the government rather utilize the Stabilization Fund and take its hands off the Heritage Fund. He expressed that, “Any use of majority strength in parliament to rope in the Heritage Fund defeats the fine arrangement which serves current fiscal interest, public expenditure interest in times of huge petroleum revenue loss and intergenerational protection.”
The Finance Minister, Ken Ofori-Atta, yesterday, requested Parliament to amend the Act to allow government to use monies from the Heritage Fund. Consequently, a researcher is calling on the government to cut some budgeted expenditure and use the funds for the COVID-19 emergency expenditure.
“There are ways to get funds to spend”, Obrempong Yaw Ampofo, Senior Research Fellow at Western Center for Extractive Research and Advocacy, a policy Think-thank base in the Western Region, has said in support of Prof Gatsi’s suggestions that the government stay off the Heritage Fund and look else for funding to fight the COVID-19.
“What strikes me is the president recognizing that we are not in normal times, but we still want to spend in other areas how we’ve known and done in the normal times”, he wondered.
“Except for critical infrastructure and spending, I think the “not normal times” should reflect in other facets of our public spending.
“The donation of three months of his salary is a good call, and I see others following similarly, except to say that, we needn’t have to create a COVID-19 fund, but rather direct the funds to the National Contingency Fund that has been dissipated”, Mr Ampofo posited.
Parliament is only allowed per the ACT to pass a resolution of MAJORITY of parliamentarians only after 15 years from 2011 (which can only happen from 2026) to withdraw a portion of the accumulated interest and not the principal. It is therefore clear that the object and timing of the Heritage Fund does not allow for any utilization under the present circumstances. The object of the Heritage Fund is to serve as an endowment for future generations of Ghana citizens who will be alive at the time when all petroleum activities come to an end.
Readers should note that the government has factored both the Stabilization and Heritage Funds into the foreign reserves and any undue withdrawal may undermine their role in the reserve position of the country.
“Parliament is hereby called upon to maintain fiscal discipline principles by ensuring that we do not consume all we have just because of the Coronavirus”, Prof Gatsi noted.
Mr Ofori-Atta in his presentation made to Parliament on the economic impact of the Coronavirus pandemic suggests that the targeted surplus primary balance and lower than 6% budget deficit are not to be expected by end of the fiscal year. The deficit target now is 6.6% of GDP implying that the Fiscal Responsibility Act not in control. This is not strange because of the strength and multi-dimensional effects of the pandemic on agriculture, trade, services, imports and petroleum receipts.
He also requested parliament to approve GHC1 billion from the Stabilization Fund as required by sections 9 &12 of the Petroleum Revenue Management Act, 2011(ACT 815) as amended.
The object of the Stabilization Fund is to serve as cushion for the finances of the country in times of massive unanticipated shortfall in petroleum revenue. This request by the minister is appropriate as it is in line with the object of the Act.
Here, Prof Gatsi again is suggesting that, the amount requested must be granted on quarterly basis and in line with a withdrawal formula in section 12 in which: Parliament considers 75% of the estimated quarterly shortfall of the ABFA; Parliament considers 25% of the balance standing in the Stabilization fund at the beginning of the fiscal year; and Parliament is to grant to the Finance Minister, an amount considered to be lesser of (1) and (2) above.
“This shows a deliberate attempt to protect the Stabilization Fund from being dissipated even when there is reason to withdraw.
“Though the Minister is acting within the law to request for a withdrawal from the Stabilization Fund, parliament must adhere to the rule in line with the wisdom of Act 815”, he added.