The presentation made to Parliament by Hon. Ken Ofori-Atta on the economic impact of the Coronavirus pandemic suggests that the targeted surplus primary balance and lower than 6% budget deficit are not to be expected by end of the fiscal year.
The deficit target now is 6.6% of GDP implying that the Fiscal Responsibility Act not in control. This is not strange because of the strength and multi-dimensional effects of the pandemic on agriculture, trade, services, imports and petroleum receipts.
The Finance Minister has requested parliament to approve Ghc1Billion from the Stabilization Fund as required by sections 9 &12 of the Petroleum Revenue Management Act , 2011(ACT815) as amended.
The object of the Stabilization Fund is to serve as cushion for the finances of the country in times of massive unanticipated shortfall in petroleum revenue. This request by the minister is appropriate as it is in line with the object of the Act.
However, the amount requested must be granted on quarterly basis and in line with a withdrawal formula in section 12 in which:
- Parliament considers 75% of the estimated quarterly shortfall of the ABFA;
- Parliament considers 25% of the balance standing in the Stabilization fund at the beginning of the fiscal year;
- Parliament is to grant to the Finance Minister, an amount considered to be lesser of (1) and (2) above.
This shows a deliberate attempt to protect the Stabilization Fund from being dissipated even when there is reason to withdraw.
Though the Minister is acting within the law to request for a withdrawal from the Stabilization Fund, parliament must adhere to the rule in line with the wisdom of Act 815.
HERITAGE FUND
The Minister also requested parliament to amend the Act to allow government use monies from the Heritage Fund. The object of the Heritage Fund is that it is to serve as endowment for future generations of Ghana citizens who will be alive at the time when all petroleum activities come to an end. Parliament can also pass a resolution of MAJORITY of parliamentarians only after 15 years from 2011 (which can only happen from 2026) to withdraw a portion of the accumulated interest and not the principal. It is therefore clear that the object and timing of the Heritage Fund does not allow for any utilization under the present circumstances. Any use of majority strength in parliament to rope in the Heritage Fund defeats the fine arrangement which serves current fiscal interest, public expenditure interest in times of huge petroleum revenue loss and inter- generational protection.
Government has factored both the Stabilization and Heritage Funds into the foreign reserves and any undue withdrawal may undermine their role in reserve position of the country.
Parliament is hereby called upon to maintain fiscal discipline principles by ensuring that we do not consume all we have just because of the Coronavirus.
