As part of the activities marking the 5th year since Ghana started commercial production of oil in Ghana’s Western Region, various Civil Society groups in the natural resource sector have revisited the debate of whether or not Ghana should keep some amount of the oil revenues for generations yet unborn.
While some sections of the group support the reconsideration of the scraping of the heritage fund, others strongly oppose the idea. Below is the argument from some of the groups I captured at various meetings at different times and locations.
According to the campaign coordinator for the Integrated Social Development Center ISODEC, Dr. Emmanuel Steve Asare Manteaw, inasmuch as it is important to keep some monies from the oil revenues for tomorrow’s generations, it is healthy to check with time, whether it is still relevant to continue keeping those monies.
Dr. Manteaw at a day’s citizen engagement forum on five years of oil in Ghana in Accra was of the view that five years is enough to test the policies governing Ghana’s Oil sector including the relevance of keeping the heritage fund.
At the forum he noted “we had our recent Eurobond at 10.75% interest rate whereas we have some monies sitting somewhere earning us less than 1 percent. Does it really make sense to put the heritage and stabilization fund outside the economy knowing very well its potential impact on the local currency which is declining?
Even though he did not call for the abolition of the Heritage fund, Dr. Manteaw argued that “for you to stabilize your local currency, you need a certain constant flow of foreign exchange which is why we export a lot…now we have local currency from our oil production sitting outside the economy and we go borrowing to shot up our local currency. Should we reconsider that arrangement?” He queried.
On the other hand Dr. Manteaw who has recently joined the Public Interest and Accountability Committee PIAC as a technical director representing the Ghana Extractive Industry Transparency Initiative GHEITI added that “there is an economic rationale for keeping oil money outside the economy which is to avoid overheating. If you were producing at a certain level of production over what your economy can contain, then you need to put some of the money away because if you have too many dollars into the economy, your local currency will become too strong.”
He explained further that “by the basic principles of economics, if you have an abundance of a certain commodity, its value goes down, and so as a result, it will lead to the devaluation of our currency. In order for our currency not to become too strong because we are an export driven economy, and we don’t want our exports prices to be too high compared to other competing countries, we put some of the money outside the economy [In the Heritage and Stabilization Funds].”
Despite the above explanations given, the ISODEC coordinator set the minds of participants who were present at the Ramadan Beach Hotel rolling when he questioned that “at this level of oil production, will there be a problem of overheating if we were to bring the dollars we are earning from the petroleum sector kept in the Heritage Funds into this economy?”
In summary, Dr. Manteaw noted that the greater benefit Ghana can derive from the commercial oil production has a direct link to how citizens can demand accountability from duty bearers using already published reports by the Public Interest and Accountability Committee PIAC, the Finance Ministry, the Bank of Ghana and other related reports.
Better Impact Foundation
According to the organization’s spokesperson, “we do not want to save while we go hungry, and so why cannot we go into an agreement that when things are not working well for us, we can go into that [Heritage and Stabilization] fund and withdraw a certain amount or percentage and use it to stabilize the economy? In the same way when things are moving on well with us we keep saving. This in my view is better compared to Ghana going to the bond market to issue bonds which its interest rates are not too good for our economy.
Benjamin Boakye-The African Center for Energy Policy-ACEP
According to the deputy executive director of the African Center for Energy Policy ACEP, Benjamin Kwame Boakye, government will have to show how effective it has used the over 98 percent of total oil revenues since 2011 before any further debate on the remaining 8 percent which goes into the Heritage and Stabilization Fund are revisited.
He argues “if you look at the total receipt for the five years, what has gone into the Heritage and Stabilization Funds are about 8 percent [of total oil monies]. So if you have spent 92 percent, and all you are arguing about now is how to spend what is meant for future generations now, then I think we are losing the argument. We should rather think about how well we have been able to utilize the 92 percent and satisfy ourselves with that then you can think about how to use the 8 percent.
Economically, according to the deputy executive director, the factors which are making the cedi weaker by the minute to other trading currencies should also be considered before the idea of bringing the Heritage fund to Ghana for use now.
His argument; “In 2011, we put about $11m into that [Heritage] account. We had an economy that had an exchange rate of GH1.5 to the dollar. If we had invested this $11m into our economy, that seed money would have translated into about $5m dollars because of the behavior of the cedi to the dollar. Technically that money would have been lost by now. So the dynamics are not so simple. If you are thinking about saving for future generations, then you need a stable currency, you need an investment which is secured; you don’t want to go playing with it. In Ghana we can ask ourselves that in which instrument is secured to give us the returns that will ensure that we are saving for future generations and we are not risking loosing that money. These are the dynamics we need to factor into our thinking to make sure that we a not just arguing to push that money in here and loose it. If you bring it here and invest in real estate or production and you lose it, it will be gone and the essence of saving for future generations will not be there. So we have to look at the dynamics, and slow down the cedi which is depreciating so fast”.
Nobel Whajah-Oil Watch/Civil Society Platform on Oil & Gas
According to Noble Whajah who works for Oil Watch Ghana but also serves as a steering committee member on the Civil Society Platform on Oil & Gas, the role of the state in the provision of social infrastructure must also be reviewed, if not, there could be all the monies at our disposal, but we may not know what to do with it.
At a citizen conversation on accountability at Ramadan Hotel in Accra, he argued that “I think the issue of whether we bring in the [Heritage and Stabilization] money to invest it in the system now or keep it abroad for the purpose of inclusive development are issues of deep economic analysis and I believe the views expressed by ACEP and ISODEC are worth considering. But apart from that, I think the way we can achieve inclusive development will also have to be determined by the kind of political and infrastructure we have as a state. We may have a lot of money to spend on education, but what is the role of the state in that kind of education because we have all consigned ourselves into believing that it is the private sector that does everything better?….all that I’m saying is that the way the state sets it priorities towards our country’s development will have to be carefully looked at, if not, when all the oil monies are given to us, we may end up spending it on unprofitable ventures.
It must be noted that the debate of whether to keep the heritage and stabilization funds or not started when the general secretary of the ruling National Democratic Congress NDC Johnson Asiedu Nketsia on May 1 2013 openly questioned why such monies were kept outside the country with little returns on those investments “while the country is faced with economic challenges occasioned by the rolling of many public sector workers onto the Single Spine Salary Structure and the drop in prices of Ghana’s major export commodities” in that same year.
For now, the debate keeps going on at various platforms where Ghana’s oil revenues are discussed.
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By: Obrempong Yaw Ampofo