Collapse ABFA, Stabilisation Fund into sinking fund — Isaac Adongo

BY: Maxwell Akalaare Adombila
Isaac Adongo - MP for Bolga

THE Member of Parliament (MP) for the Bolgatanga Central Constituency, Isaac Adongo, has called for a review of the petroleum revenue management law to create a sustainable flow of foreign exchange for the amortisation of Eurobonds.

The Deputy Ranking Member of Parliament’s Finance Committee proposed that the Stabilisation Fund and the Annual Budget Funding Amount (ABFA), which are creations of the Petroleum Revenue Management Act (PRMA), 2011 (Act 859), should be collapsed into the sinking fund to create a pool of stable resources to retire the Eurobonds and reduce the country’s debt burden.

The National Democratic Congress (NDC) MP and chartered accountant said at a forum on the economy last Monday that the review could accumulate between $800 million and $1 billion in the sinking fund to deal with debt repayments.

He said a robust sinking fund was urgently needed as a credible debt repayment avenue to create debt sustainability and revamp confidence in the capital market.

Leadership dialogue

Mr Adongo was speaking at the 11th Leadership Dialogue Series organised by the Centre for Social Justice (CSJ), an economic and socio-political think tank.

It was on the theme: Transforming Ghana’s Economy: Scape Goats, Real Causes and Hard Choices: A Perspective of a Member Of Finance Committee of Parliament.

The event was broadcast live via social media platforms.

The event also featured presentations from Prof. John Gatsi, the Dean of the University of Cape Coast Business School, Dr Priscilla Twumasi Baffuor of the University of Ghana and Mrs Gladys M. Osabutey of the Ministry of Finance.

Fiscal challenges

Mr Adongo said the economy was enduring mounting fiscal risks driven largely by the high proportion of tax and total revenue used to pay for compensation, debt service and statutory payments.

“By the end of 2019, debt service alone was consuming about 91 per cent of total tax revenue with only a paltry nine per cent left to finance the rest of the budget.

“This means that to adequately meet the full costs of non-discretionary expenditure, the government had to elevate the public sector debt by borrowing to pay for part of debt service, compensation of employees and statutory payments.

“Goods and services and capital expenditure have to be financed essentially by borrowing,” he said.

As a result, the MP said the government’s increased appetite for borrowing started manifesting in 2019 when debt service (interest and amortisation) as a percentage of tax revenue exceeded 70 per cent.

That, he said, led to the country being locked out of the international market, multiple downgrades by credit ratings agencies and a return to the International Monetary Fund (IMF) for a bailout programme.

Debt vulnerabilities

The MP said the high debt had created fiscal vulnerabilities for the economy.

“High debt service, even if it is covered by good tax revenue generation, will still require high levels of foreign currency (FX) reserve buffers to be able to pay the FX obligations imposed by the high component the forex debt service.

“This is the reason Ghana’s external vulnerability has been heightened by high foreign component of public debt, low levels of net reserve buffers and high demand for increased export earnings.

“This has resulted in a cycle of more FX-denominated bonds to provide artificial buffers, further worsening debt service obligation and more so, poison to the economy,” the financial expert added.


Mr Adongo said the country needed to find lasting solutions to the growing debt burden.

One of those, he said, was the creation of a stable source of funding to retire Eurobonds and other forex-denominated debts that the country took.

Consequently, he recommended that the PRMA be reviewed to maintain the current arrangement for the Heritage Fund and abolish the ABFA and Stabilisation Fund into a unified arrangement to fund the sinking fund solely for debt amortisation of Eurobonds.

“This has the potential to generate between $800 million and $1 billion to fund Eurobond maturities.

“The building of the sinking fund will help reduce the interest payments and the impact of exchange losses on the national budget and help restore fiscal and debt sustainability and soften investor sentiments,” he said.


The Deputy Ranking Member of the Finance Committee also proposed an amendment to the Public Financial Management Act, 2016 (PRMA), Act 921 to strengthen debt management and make the utilisation of the sinking fund a bi-annual reporting requirement with clearly defined framework.

“This should include a forecast of all expected flows to the fund, actual receipts, forecast maturities to be amortised for each debt and actually amortised,” Mr Adongo said.