Government’s consistent lowering of the cap on the Ghana Stabilisation Fund (GSF) could ultimately defeat the purpose for which the Fund was set up, with monies in the Fund expected to reach an all-time low this year.

Cap on the fund was initially reduced from US$250 million to US$150 million and then reduced to US$100 million, according to the Finance Minister earlier this year in his 2015 supplementary budget estimates.

The continued depletion of the Stabilization Fund, whose closing book value at the end of 2015 was just US$177.4 million, some analysts say, weakens its capacity to help sustain critical public expenditure especially in times of lower than expected oil prices.

The Stabilisation Fund, which was established under the Petroleum Revenue Management Act (Act 815), was to provide budgetary support in times of shortfalls in expected petroleum revenues, but the Act was later amended to allow excess monies in the fund, ie beyond US$150 million, to be moved into a sinking fund for debts repayment purposes.

The Fund had a balance of US$379.19 million in 2014 when the Finance Ministry announced a cap of US$250 million, which allowed the excess amount to be channeled into a contingency fund to allow for debt servicing.

A year later even as petroleum revenues fell, the Finance Minister lowered the cap on the fund to US$150 million, and transferred the excess to the Sinking Fund to be used for debt servicing.

For the third year running, the Finance Ministry, in the 2016 mid-year budget review, announced a reduction of the cap to US$100 million which would mean that the excess would be transferred to the sinking fund for debt servicing again.

Government will thus move an amount in excess of US$74 million into the sinking fund, as its bid to raise another Eurobond this year has been met with demands by investors for excessive yields.

Oil revenue since inception

Since Ghana began the commercial production of oil in 2011, a total of US$3.3billion dollars has been realised. The Petroleum Revenue Management Act (Act 815) stipulates how the oil revenue should be distributed.

Based on the Act, transfers were made to the Ghana National Petroleum Corporation (GNPC), to the Annual Budget Funding Amount (ABFA) and the Ghana Petroleum Funds.

Over the last five years, GNPC has had a total of US$959 million, representing 30 percent of all revenue received from oil. The ABFA, which is the share of the oil revenue used to support the budget, it has received a total of US$1.4 billion, representing 43 percent of all oil revenues.

The Ghana Petroleum Funds, which comprise of the Stabilisation Fund and the Heritage Fund, together received US$874 million, representing 27 percent of all oil revenue since inception.