MoF directs GNPC to expunge US$50m loan from books -GHEITI report

The Ministry of Finance (MoF) has directed the Ghana National Petroleum Corporation (GNPC) to expunge the US$50 million loan owed by the ministry from its books, according to the 2017 & 2018 report of the Ghana Extractive Industries Transparency Initiative (GHEITI) on the oil and gas sector.

GNPC advanced US$50 million to the Ministry of Finance in 2013 for the construction of the Western Corridor roads which leads to the Atuabo Gas Processing Plant. The money was expected to be repaid in three months but has still not been paid back.

GHEITI, in its report, noted that GNPC as of the end of June had not received payment in respect of this loan.

“On September 7th 2018, the ministry wrote to inform the Independent Administrator preparing the Ghana 2016 EITI Report (with the Corporation in copy) that, provision had been made in the 2019 Budget for the settlement of the loan to GNPC.

“On December 15, 2018, GNPC indicated that it received another letter from the ministry directing that the amount be expunged from its books on the grounds that per the Earmarked Funds Capping and Realignment Act, 2017 (Act 947), the Minister of Finance is empowered to cap all earmarked funds at 25 per cent of tax revenues. The ministry indicated that the government had not retained GNPC’s flows thus far with the view to offsetting the US$50 million loan,” the report pointed out.

GHEITI in its recommendations noted that this move was viewed by some industry stakeholders as not the best on the part of the Ministry of Finance and, therefore, urged the two parties involved to resolve the issue amicably for the purpose of transparency.

25 per cent cap

GHEITI also asked the MoF to critically review its decision to cap the allocations of GNPC at 25 per cent of tax revenue.

It believes this move further reduces the corporation’s allocations to meet operational expenditure.

“This has the potential to deny the national oil company of the available resources to finance critical exploration activities and undermines the ability of the corporation to wean itself from allocation of petroleum revenue by 2026,” it noted.

Discrepancies

The report indicated that the 2017 reconciliation of petroleum receipts recorded a net discrepancy of negative US$652,814 and an absolute discrepancy of US$982,678. The reconciliation of 2018 also had a net discrepancy of US$311,000 and absolute discrepancy of the same amount.

The net and absolute discrepancy in 2017 represent 0.063 per cent and 0.096 per cent, respectively, of the total government receipts in 2017.The net discrepancy is 0.11 per cent of the aggregated revenues used in determining materiality.

The 2018 discrepancy represents 0.018 per cent of total government revenues. It is 0.03 per cent of the sum of the revenues used in determining materiality.

Discrepancies are differences between government receipts and company payments. Discrepancies are positive (over) if for the same revenue stream, the amounts reported by a company exceed that reported by the government agencies as receipts. If the amount received by the government agencies exceeds payments by a company, the resulting discrepancy is negative (under).