Evaluate impact of priority areas for oil spending -PIAC

BY: Ama Amankwah Baafi

The Public Interest and Accountability Committee (PIAC) has called for an impact evaluation of the priority areas that are selected for spending of oil revenues.

An assessment by the committee revealed that even though four priority areas are selected, spending normally covers all the 12 listed priority areas within the Petroleum Revenue Management Act 2011, (PRMA) Act 815.

The 12 priority areas for selection are agric and industry, education, science and technology, potable water, infrastructure development, public security and social welfare.

The rest are strengthening institutions, healthcare delivery, rural development, housing delivery, alternative energy and environmental protection.

Out of these, the government has targeted four priority areas namely, agriculture, industrialisation, road, rail and other critical infrastructure development, and physical infrastructure and service delivery in education and health, to receive support from oil revenue.

“This practice has resulted in the Annual Budget Fund Amount (ABFA) being used to fund all manner of activities outside of the four priority areas. PIAC believes there ought to be a properly conducted impact evaluation of priority areas to precede the selection of new areas,” the Vice Chairman of PIAC, Mr Nasir Alfa Mohammed, said during a media engagement in Accra.

A fundamental requirement for the spending of petroleum revenues in the PRMA as amended by Act 893 is a national development plan.

However, in the absence of the plan, the government selects priority areas on which to focus its spending of petroleum revenues.

Presenting the highlights of PIAC’S 2021 Semi-Annual Report on the management and use of petroleum revenues, Mr Mohammed emphasised that in the face of a lack of clarity on the basis for selecting priority areas, the selection of new priority areas must be guided by detailed impact evaluation of the ABFA expenditures.


Some report findings

It emerged that following the decision of the Supreme Court of Ghana in the case of Kpodo and Another versus Attorney-General in 2019, that the District Assemblies Common Fund (DACF) be added to the recipients of the ABFA to receive five per cent, an amount of GH¢129.26 million has been allocated to the Fund for 2021.

This will ensure direct implementation and monitoring of projects at the sub-national level.

In the first two quarters of 2021, there was no disbursement of the ABFA to the DACF.

Instead of withdrawing from the GSF, the government utilised an amount of GH¢40.17 million from the Treasury Main Account to shore-up the ABFA in the first quarter.

The report said despite withdrawals from the GSF, the reserves of the GPFs increased by 9.90 per cent in the first half of 2021, over the reserves for the same period in 2020.

“Even though there was an increase in the net profit on investment of the GPFs, compared to the same period of 2020, the year-to-date yields of both the GSF and GHF reduced. The first half of 2021 yield of the GHF was down by 2.13 per cent as compared to a gain of 5.28 per cent in first half of 2020,” it said.

However, for the GSF, the first half of 2021 yield of 0.03 per cent was lower than the 0.39 per cent for the same period of 2020.

The Earmarked Funds Capping Realignment Act, 2017, which discontinued allocations to Ghana Infrastructure Investment Fund (GIIF), for infrastructural development has been amended to restore funding to GIIF.

For the first half of 2021, the average price achieved by the Ghana Group was higher than the government’s average estimated benchmark price.

“PIAC recommends to the Ministry of Finance that there is the need for the decision to find expression in the PRMA, which is being reviewed, with the necessary provisions as is the case with the ABFA and GIIF. This will enhance direct implementation and monitoring of ABFA-funded projects at the sub-national level,” the report said.

Keynote
- The report covers the period January to June 2021.
- It encompasses a broad range of issues associated with petroleum revenue management such as information on production, liftings, total revenues accruing and allocation by government and the management of the funds set aside in the Ghana Petroleum Funds, (Ghana Stabilisation Fund and the Ghana Heritage Fund.)