Government should stay away from the heritage fund

Press Release, Accra- 15th February 2017

The Africa Centre for Energy Policy (ACEP) has noted the desire of Government to use oil revenues to finance campaign promise of free Senior High School (SHS) education. ACEP has been campaigning for the use oil revenue to finance the pro-poor sectors of education and agriculture for four years. Therefore, we cannot, in principle, be against the use of oil revenue to finance education. However, we want to alert government that the petroleum revenues are governed by the Petroleum Revenue Management Act, Act 815, which was passed after deep consultation with citizens. In spite of many implementation challenges, the PRMA has been a model for many countries and Ghana can only do better at improving on transparency and accountability around the use of the oil revenues. Much as we support the use of oil revenue for financing education, we want government to recognize the significance of the heritage fund and not touch it.

ACEP therefore states its position on the use of oil revenue to finance the free SHS as follows;

1. Heritage Fund Still Relevant- the principle of intergenerational equity which informed the establishment of the fund ensure that ownership of the resources is shared among the living and the yet unborn. It also ensures sustenance of revenue flow after the oil has been exhausted. It is easier to assume that those of us living today can invest the heritage fund to benefit the future generation. This assumption is overly simplistic and takes away the right of the future generation to decide on their own priorities. The heritage fund represents about 9% of Benchmark Revenue (BR), leaving 91% of the BR for the national budget. This conservative amount left for the future should not attract uncontrolled appetite to spent. For the past 6 years the total payments made into the fund plus interest is $277 million. This is not enough to fund only about 3 years of the cost items to be waived by government estimated to be about GHS327million, holding the 2015 enrolment constant. With anticipated growth in enrolment occasioned by the programme, the heritage fund could be woefully inadequate to sustain the free SHS programme

2. Use the Annual Budget Funding Amount (ABFA)- the credible window for financing the free SHS policy from oil revenues will be through the ABFA. It must however be highlighted that the current architecture of the PRMA allows for only 30% of the ABFA for recurrent expenditure. Given that most of the cost items for the implementation of the Free SHS are recurrent expenditures, government will have to amend the law to be able to spend more that 30% of the ABFA ACEP will want to recommend that;

1. Government should continue to grow the Heritage Fund. The purpose of establishing the fund is still valid today and we should not deny the future generation an opportunity to decide what they do with their share of the resources as was done by past leader with mineral revenues.

2. The PRMA should be amended to allow 50% of the ABFA to support the Free SHS programme. This will be a more equitable way of distributing the resources than financing “ghost project” through thin distribution of oil revenues.

3. Reduce allocation to GNPC- Government should take steps to streamline the operations of GNPC to focus on its core mandate and redirect some of its allocation into the budget to finance education.

4. Use part of Solid Mineral Revenue to support the Free SHS- this is an opportunity for government to introduce governance framework similar to the PRMA on mineral revenues and allocate portion of mineral revenues to education.

5. Government should recognize that the capital budget of the education sector has been lower than 6% of the total sector budget in recent past, therefore, education sector financing should equally be big on improving the asset base of the sector.

Signed Benjamin Boakye Deputy Executive Director