Ghana oil revenue can not be used as security for borrowing – Petroleum Management Bill

The Petroleum Management Bills 2010 went through a second reading in Parliament on Monday with a strong proposal that prohibits the use of oil revenue as security for borrowing.

The 65 clause bill set out the formulae for the management and utilization of the oil and gas revenue.

It proposes that establishment of a Petroleum Account to be held by the Bank of Ghana.

Petroleum revenue according to a joint committee report of Finance and Mines and Energy, will not be treated as part of the normal tax revenue pool.

However, the bill proposes that 50 to 70 per cent of the total revenue from oil and gas will be used to support the budget each year and the remaining put into savings.

Thirty per cent of the amount saved will be allocated to the Ghana Heritage Fund for the future generations with the remaining 70 per cent put into Ghana Stabilization Fund.

Mr Klutse Avedzi, Chairman of the Finance Committee, who laid the report, said government took into account international best practice and experiences from oil producing countries like Sao Tome and Principe, Norway, Nigeria, Trinidad and Tobago and Angola.
He said a lot of consultations had been done throughout the country to collate views of Ghanaians on the management and the utilization of the petroleum revenue.

Inputs, according to him, had also been received from children on platforms provided by the UNICEF and Ghanaians abroad.

To ensure transparency, he said the petroleum revenue due the country would be paid into the Petroleum Account.

He said for the purpose of allocation and disbursement, Ghana
Stabilization Account had been established to cushion the economy and sustain public expenditure capacity during periods of petroleum shortfalls.

He explained that Ghana Heritage Fund was also established as an investment fund for the benefit of the future generations when the reserve got depleted.

He noted that the Petroleum Account permitted three types of disbursements -disbursement for budget support, disbursement into the Ghana petroleum funds and exceptional disbursements permitted by the act.

He said at the end of commercial production of the oil in Ghana, the Heritage and the Stabilisation fund would be consolidated into a single fund which he said would be christened Ghana Petroleum Wealth Fund.

According to him, clause 45-50 of the bill mandates the Audit Department of the Bank of Ghana to be responsible for the internal audit of the Ghana Petroleum Funds whilst the Auditor General would be responsible for the external auditing.

He stated that for the purpose of transparency and public oversight, a Public Interest and Accountability Committee (PIAC) had been established.

The duty of this committee according to him was to monitor and evaluate compliance with the future Act by government and other relevant institutions in the discharge of their duties in relation to the use and management of the petroleum resources.

On the petition filed by the Western Regional House of Chiefs, seeking 10 per cent of the oil revenue, Mr Avedzi said the committee admitted that the Western Region had suffered underdevelopment over the years and that it was necessary that special interventions were taken by government to expedite the development of the region.

When debate ensued, the Ranking member for Finance Committee, Dr Osei Akoto said the call by the Western Regional House of Chiefs was as a result of the recent developments in the country in which government was giving special development interventions to some other regions.

He sited the example of the Savanna Accelerated Development Authority (SADA) which was a special development intervention for the three northern regions which he said triggered other regions to also agitate for assistance.

Mr Alfred Abayateye, NDC Member for Sege, questioned the establishment of the PIAC saying it was not nationalistic.

He said the inclusion of the Queens in that committee was unacceptable because it was not all communities in the country that had Queens.

Mr Felix Twumasi-Appiah, NDC Member for Sene, said the inclusion of the prohibition was a problem since it would tie the hand of a government which could use the oil revenue to securitize some borrowings for the benefit of the country.

Source: GNA