The Petroleum Revenue Management Act 2011 (Act 815) was passed by Parliament in March 2011. The law was described by stakeholders as most progressive and provided a transparent framework for managing Ghana’s petroleum revenues. However, like many new laws, the implementation of the law has brought to the fore some challenges which must be addressed to ensure the smooth application of the progressive provisions in the law. The Government of Ghana recently announced its decision to review the law and invited proposals from Ghanaians for consideration. This paper contains proposals from Civil Society Organizations. The proposals cover the fiscal framework, financing of GNPC, the Annual Budget Funding Amount, transparency and accountability among others.
The current fiscal framework connects transfers to the GNPC, the benchmark revenue, the ABFA and the GPFs. The application of this framework over the last three years has however become problematic for some reasons.
In the last three years, both the PIAC and Civil Society Organizations observed the problems associated with revenue forecasting and its potential to undermine the counter – cyclical objective of the fiscal framework for managing revenue inflow and outflow. As a result of Government’s inability to meet its targets for oil receipts, transfers to the ABFA and the Ghana Petroleum Funds (GPFs), have been adversely affected. This has been blamed on over – estimation of oil revenues. It is also due to the fact that the fiscal framework is revenue based rather than price based. For instance, the law provides that transfers to the Ghana Petroleum Funds are possible only when quarterly collections of revenues exceed the ABFA by one quarter (Section 11(2) and Section 23) . Thus, in periods of over-estimation when the ABFA is not fully realized, there will not be transfers to the GPFs. This places more attention on spending at the expense of savings. This circumstance also creates room for Government to deplete the Stabilization Fund.
The law also provides the Minister of Finance the power to determine ceiling on the Ghana Stabilization Fund (Section 23(3)) but does not provide guidelines for determining the ceiling. This is too discretionary as Parliament is unlikely to disapprove the ceiling determined by the Minister. The law also allows the Minister to transfer any excess over the ceiling to the Contingency Fund or used for debt payments (Section 23(4)). But since the PRMA does not govern the spending of the Contingency Fund, discretionary spending of the Fund could lead to non-prudential management of the revenues. For instance, since the PRMA does not govern the utilization of the funds in the Contingency Fund, and by extension the areas in which funds in the contingency fund will be spent on, it will be difficult to hold the Minister responsible if the Minister decides to spend that money outside the priority areas defined in the Act. Where there are no tight regulations for the determination of the maximum ceiling of the Stabilization Fund, the Minister may unduly swell the size of this seemingly discretionary fund.
