The Africa Centre for Energy Policy (ACEP) has disclosed that in as much as it supports the use of oil revenue for financing education, it would not advise government to exploit the Heritage Fund now due to its significance for present and future generations.
ACEP, in a press release issued in Accra signed by Benjamin Boakye, Deputy Executive Director, ACEP, said even though it has been campaigning for the use of oil revenue to finance the pro-poor sectors of education and agriculture for four years, the principle of intergenerational equity, which informed the establishment of the Heritage Fund, ensures that ownership of the resources is shared among the living and the 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 percent of Benchmark Revenue (BR), leaving 91 percent of the BR for the national budget. This conservative amount left for the future should not attract uncontrolled appetite to spend.”
It mentioned that for the past six years, the total payments made into the fund plus interest is $277 million, adding that this is not enough to fund only about three years of the cost items to be waived by government estimated to be about GHS327 million, 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,” it said.
ACEP added that government should rather use the Annual Budget Funding Amount (ABFA) as a credible window for financing the free SHS policy from oil revenues.
“It must however be highlighted that the current architecture of the PRMA allows for only 30 percent 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 than 30 percent of the ABFA.”
It also called on government to continue to grow the Heritage Fund and reduce allocation to the Ghana National Petroleum Corporation (GNPC) and use part of the Solid Mineral Revenue to support the Free SHS.
“Government should recognize that the capital budget of the education sector has been lower than 6 percent of the total sector budget in recent past, therefore, education sector financing should equally be big on improving the asset base of the sector.”
The Civil Society Platform on Oil and Gas (CSPOG) has also asked government to abandon its decision to use the oil and gas Heritage Fund for financing the free Senior High School (SHS) programme.
According to Dr Steve Manteaw, the Chair of CSPOG, “We have even sold our golden share in AngloGold Ashanti and used the proceeds to pay salary, and today we have nothing to show for it.”
“CSPOG does not discount the importance of education in nation-building, and is in fact in full support of the free SHS policy, but believes this can be done without encumbering the small fund it was preserving for future generation.”
The CSPOG also pointed out that at the current production levels and world market prices, the Heritage Fund is not likely to yield more than US$25 million a year, and so once the accumulated fund is exhausted in the first year of the free SHS programme, which will certainly be the case, the annual Heritage streams will be woefully in adequate in meeting the free SHS expenditure.
“CSPOG wishes to caution the government and all Ghanaians alike that the over-reliance on oil revenue, which presently constitutes a paltry 3 percent of total government revenue could lead to the country being afflicted by the dreaded Dutch disease. We must look more to taxes as the major financing mechanism for our development, and treat oil as a mere addition.”
By Samuel Boadi