This is contained in the Petroleum Revenue Management Bill, which is before Parliament.
Whereas the Heritage Fund will ensure intergenerational equity because of the finite nature of resource revenue which compels some governments to save windfall revenues for future generation, the Stabilization Fund would be used to mitigate volatile situations that might arise in future.
At a two day workshop organised for Members of Parliament by the Parliamentary Centre at Koforidua in the Eastern Region, Mr Atoine Heuty a representative of Revenue Watch Institute stated that money to the overall national budget would be limited.
According to him, majority of the petroleum revenue should be channeled into the Heritage and Stabilization funds because government could earn returns on them if the funds were invested in stable securities.
The workshop was to enable Members of Parliament to discuss the Petroleum Revenue Management Bill in the context of international practice and the challenges facing the Ghanaian economy.
It was also to develop a response to Ghana’s Bill and make recommendations to refine the bill-making process and also to adopt the methodology of sharing international experiences that discuss trade-offs and policy options.
Mr Heuty noted that since oil and mineral revenues were not perpetual, if a country did not employ them efficiently they might never help in achieving a better development.
He said if public organs and citizens grew accustomed to large inefficient public expenditure, the decline in the petroleum production could cause a severe shock and degenerate into the “Dutch Disease”.
Mr Heuty said the Dutch Disease phenomenon negatively affect an economy which could lead to a sharp inflow of oil foreign currency to the detriment of other sectors of the economy.
He said the inflows normally would lead to currency appreciation making the country’s other products less price competitive on the export market.
Dr David Nguyen-Thanh of German Technical Cooperation (GTZ) noted that experience elsewhere suggested that proper and responsible management of petroleum revenue was essential for the future development of the country.
“The Bill provides the framework that will guide the collection, allocation and management of petroleum revenue for the benefit of the current and future generations,” he said.
He added that the Bill addresses three specific challenges – how much of the revenue will be spent now? How much of it to be saved and the means of de-coupling government spending from the volatility of petroleum prices? How to safeguard the rest of the economy from undue exchange rate approach?
Dr Nguyen-Thanh said the idea was to make sure that management of petroleum revenue was based on sound sustainable fiscal policies because resources were finite.
He said the Bill conforms to international good practice such as assigning clear roles and responsibilities to relevant stakeholders involved, and setting out clear quantitative rules to guide the inflow of petroleum receipts.
Dr Nguyen-Thanh said the Bill clearly defines conditions under which savings of the revenue could be withdrawn and be used for annual spending through the budget.
In addition, he said, the Bill has incorporated checks and balances and provisions to ensure transparency, effective oversight and accountability.
He said the aspect of the Bill that received much discussion was the issue of how much revenue receipts to be allocated for annual budget, adding that some have supported voting a high share of the revenue now, because of the huge investment the country needs.
Dr Nguyen-Thanh said others have also argued that it was wise to spread spending over time to avoid adverse macro-economic effects today because of limited absorptive capacity and to ensure inter-generational balance use of the fund.
Referring to a research document on Ghana’s oil revenue, he said: “if Ghana would wants to strike a meaningful balance between today and future generation’s interest, one would have to settle with a rate of 60 percent or less of the oil revenue that will be allocated straight for the Consolidated Fund.”
Mr Albert Kan-Dapaah Chairman of Parliamentary Select Committee on Public Account said oil and gas revenues must be watched and managed properly for the benefit of all Ghanaians.