Ghana oil proceeds hit $3bn amidst doubts over fiscal discipline

Ghana has earned $3 billion from oil since the beginning of commercial production in April 2011. According to the Petroleum receipts report, the money was earned from the country’s share of crude oil that was exported, as well as taxes paid by companies operating in the country’s oil fields.

The report said $1.2 billion was used to fund projects outlined in the budget. The Ghana National Petroleum Authority (GNPC) received a total amount of $908.28 million, equivalent to 30 percent of the total revenue. The Stabilization Levy and Heritage Funds received $589.19 million and $243.42 million respectively.

In the first half of this year, both funds have received no inflows compared to $150.55 million and $64.52 million respectively received in the same period last year.

As at the end of June, the Ghana Petroleum Investment Fund had a total amount of $484 million. The Stabilization Fund, which is meant to stabilize and mitigate the impact of crude oil hikes, has about $233 million, while the Heritage Fund has $250 million. Also, for the first half of this year, government grossed $213 million as total receipts from crude oil exports.

In 2011, Ghana’s legislators enacted important governance reforms to manage resource extraction, having been stung by its previous experiences as a gold producer. The Petroleum Revenue Management Act (PRMA) was meant to quarantine petroleum revenues from other fiscal revenues and enabled journalists, civil society groups and parliamentarians to undertake forensic analyses of how the government was managing the proceeds from oil. It also created a framework for managing revenue volatility and saving for the future. The wall built into the government budget to separate petroleum revenues did help to create a huge amount of citizen interest in the oil sector and promoted robust oversight.

Ghana’s oil proceeds contribute about 8 percent of total government revenues. While the government managed to save $500 million in its petroleum fund by end of 2014, the PRMA did nothing to constrain the damaging effects of a $18 billion increase in public debt over the same period though the PRMA calls for a majority of annual expenditures, officially designated as deriving from petroleum revenues, to be directed toward public investment, capital spending has actually fallen from about 26 percent of spending to 17 percent since oil production began.

On the whole, instead of saving or investing for the future, Ghana has saddled itself with liabilities in order to pay the wage bill. For this reason, the country remains ill-equipped to manage swings in commodity prices and transform its resource revenues into meaningful development outcomes.