General News of Friday, 13 March 2015
Government has announced plans to extract a little over Ghc19 million from the Ghana Stabilization Fund following the drastic fall in Ghana’s projected oil revenue due to the consistent decline in price of crude oil on the world market. The main objective of the Ghana Stabilization Fund is to cushion the impact or sustain public expenditure capacity in times of revenue shortfalls such as a decrease in oil prices; which is the exact reason Government has cited for this action.
”An amount of 4.872 million cedis will be drawn from the Ghana Stabilization Fund on a quarterly basis to finance the potential gap”, Minister of Finance Seth Terkper confirmed on the floor of Parliament on Thursday.
The Fund has accumulated in excess of 590 million dollars both in capital and interest incomes from 2011 when it was established.
Government in July last year used 176 million dollars from the fund as announced in the supplementary budget presented by the Finance minister.
The Minister in the supplementary budget announced a cap on the Fund at 250 million dollars, and said it was in consonance with section 23(3) of the Petroleum Revenue Management Act 2011.
But this was challenged by the the Public Interest and Accountability Committee , PIAC, who in a statement said the capping is supposed to be done prospectively and not retrospectively as the Finance Minister had done.
PIAC early this year, however, called on government to use the monies that had accrued in the fund due to the fall in crude oil prices on the world market and its impact on governments projected revenue.
Government in the 2015 budget pegged the benchmark price of crude at 99.38 dollars per barrel but the consistent fall in the price of crude currently selling at 57 dollars per barrel is disrupting government plans.
According to government, it will go with the International Monetary Fund forecast for oil prices for the year at 52.8 dollars per barrel leading to a downward revision of government’s projected revenue by about 64%.
Government has revised total revenue estimates from oil from 4.2 billion cedis to 1.5 billion cedis ,also from 3.1 percent of GDP to 1.1% of GDP.
“The drawdown of the Ghana Stabilization Fund is significant in one major respect. It bears testimony to our efforts at building fiscal buffers in our public fiscal management. It is in times like these that we are able to reap the benefits of making a conscious effort at building the Ghana Stabilization Fund”, Seth Terkper emphasized.