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Minister of Finance could be in breach of PRMA on reporting how oil revenue is expended

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The government has set aside to spend some $421.89 million this year as the Annual Budget Funding Amount (ABFA), which is 70 per cent of the Benchmark Revenue of $602.70 million of the projected $886 million petroleum revenue for 2021.

Oil producing countries have fallen short of projected revenues from the resource as a result of the impact of the COVID-19 pandemic on oil markets. Saudi Arabia’s state-owned Aramco on Sunday announced that its profits for 2020 went down by half to about $49 billion, which is a big fall to the oil giant.

Ghana missed the target for revenue from the sector. Presenting the 2021 budget on behalf of the Finance Minister, Majority Leader and Minister of Parliamentary Affairs, Osei Kyei Mensah Bonsu, disclosed that a total crude oil production of 66.9 million barrels was recorded for 2020, as against 71.4 million barrels realized in 2019.

“As of December 2020, GNPC had lifted twelve parcels of crude oil on behalf of the State and transported 88,418.9 million standard cubic feet of gas to the Ghana National Gas Company (GNGC).”

According to him, total petroleum receipts as at end-December 2020 stood at $666.4 million, equivalent to GH¢3.8 billion, compared with the receipts of $937.6 million, equivalent to GH¢4.9 billion recorded in the same period in 2019.

The ABFA allocation, which is subject to the approval of Parliament as part of the national budget, is expected to fund the execution of public investments among others listed under the prevailing priority areas selected by the government. It also includes the funding of programmes and activities of the Public Interest and Accountability Committee (PIAC) for the period.

The expected annual petroleum revenue for the year is made up of Royalties of $201.0 million, Carried and Participating Interest of $524.9 million, Corporate Income Tax of $158.5 million and Surface Rentals of $1.30 million.

Furthermore, the government has proposed to allocate $283.00 million to the Ghana National Petroleum Corporation (GNPC) for its Equity Financing Cost of $179.33 million and share of the net Carried and Participating Interest of $103.67 million.

The Ghana Petroleum Fund (GPF) will receive $180.81 million, being 30 per cent of the Benchmark Revenue. Out of this amount $126.57 million will be allocated to the Ghana Stabilisation Fund (GSF) and $54.24 million to the Ghana Heritage Fund (GHF).

However, this development raises concerns over some possible infractions of the Petroleum Revenue Management Act 815 (PRMA) following the failure of the Finance Minister to review the selection of priority areas in accordance with the Act.

Section 21, subsection (3) of the PRMA enjoins the Finance Minister in the absence of a long-term national development plan to prioritize but not limit the spending of ABFA to twelve specific areas.

But, subsection (5) states that, “In order to maximize the impact of the use of the petroleum revenue, the Minister shall prioritize not more than four areas specific in subsection (3) when submitting a programme of activities for the use of the petroleum revenue.”

Moreover, subsection (6) requires the Minister of Finance to periodically revise the priority areas after every three years. It states that “The programme shall be reviewed every three years after the initial prioritization, except that in the event of a national disaster, the Minister may make a special request to Parliament for a release of revenue.”

It is in accordance with this that the Minister of Finance, Mr. Ken Ofori Atta, in 2017 submitted to Parliament for approval, the revision of the priority areas.

He said “For the 2017-2019 period, we propose the following priority areas: Agriculture; Physical Infrastructure and Service Delivery in Education; Physical Infrastructure and Service Delivery in Health; and Road, Rail and other critical Infrastructure Development.”

Subsequently, however, the Minister of Finance has since 2020 not sought the mandate of Parliament to revise the priority areas but continues to spend petroleum revenues allocated to the ABFA.

On the other hand, according to PIAC’s 2020 Semi Annual Report, the Ministry of Finance submitted to the Committee some four selected priority areas for 2020-2022. There are Agriculture; Road, Rail and Other Critical Infrastructure Development: Physical Infrastructure and Service Delivery in Education and Health and Industrialisation.

The Committee, in its report noted that it looks forward to the basis for the selection of the priority areas for the period 2020-2022.

“PIAC’s understanding of the provisions of the Law, in line with best practice, is that some documentary basis of Government’s rationale for making the selection should be encouraged. The availability of such information will enable the public and stakeholders appreciate the basis for the selection of the priority areas,” it said.

“The PRMA, as amended, both in letter and spirit, seeks to promote high standards of transparency, accountability and free access to information by the public in the management and use of the revenues. This is clearly demonstrated in the preamble to the Law, as well as in the plethora of transparency provisions. Indeed, each of the duty bearers in the management and use of the revenues has duties and obligations imposed upon them, including the Minister for Finance. Section 49(7) of the Act provides that, “Parliament, the Minister, the Bank of Ghana and the Investment Advisory Committee in the performance of their functions under this Act, shall take the measures to entrench transparency mechanisms and free access by the public to information,” it added.

Notwithstanding Section 49(7), the Act gives the Minister the prerogative, with the approval of Parliament, to declare some petroleum information or data confidential, where necessary. However, in line with its spirit of promoting transparency, the Act takes away this prerogative when reporting to PIAC and enjoins the Minister to declare no data nor information confidential.

PIAC further stated that “In spite of these provisions, the Ministry of Finance continued in what is becoming a trend of not timeously providing to PIAC for its Semi-Annual Reports, data on ABFA expenditure. The Committee has been compelled for the third consecutive year, and the fourth since the production of PIAC Reports, to compile a semi-annual report without ABFA expenditure data.”

For the fourth time, the Ministry of Finance, according to PIAC, failed to provide ABFA utilisation data for the compilation of PIAC Reports.

“This makes it difficult to reconcile disbursements and expenditure, and undermines the spirit of accountability as envisaged in the PRMA,” PIAC wrote.

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