During 2019, Ghana’s Petroleum Funds (GPFs) improved their performance in terms of the returns accrued on the funds invested.

The total return on investment of the Ghana Heritage Fund (GHF), year to date, during the second half of 2019 was 6.4 percent as compared to 4.71 percent in the earlier half of the year. The two-year annualized return of GHF was 7.61 percent whiles the three-year annualized return was 3.46 percent.

According to the semi-annual report on the Ghana Petroleum Funds for 2019 by the Bank of Ghana, the general fall in yields across all tenors coupled with the 75 basis points cut in US interest rates during second half of 2019 led to an increase in the capital appreciation of bonds as their secondary market prices increased, improving the marked-to-market performance of the Ghana Petroleum Funds.

The Ghana Petroleum Funds returned a net realised income of US$ 21.95 million. The Ghana Stabilisation Fund contributed 37 percent or US$ 8.21 million to total net income whilst the Ghana Heritage Fund (GHF) contributed 63 percent or US$ 13.74 million.

The GPFs reserves at the end of second half of 2019 was US$ 968.20 million, of which the GHF was US$ 579.61 million and GSF was US$ 388.60 million compared to a total of US$ 866.38 million in the same period of 2018 (of which GHF was US$ 485.17 million and GSF was US$ 381.20 million).

Yields

During the second half of 2019, the difference between the US 10-year Treasury note yield and the 2-year note yield widened by 9.62 percent from 24.82 bps in June 2019 to 34.44 bps at the end of December 2019.

This follows a 27.31 percent narrowing from 32.79 bps in June 2018 to 19.23 bps in December 2018.The 3-month Treasury bill fell by 2.23 percent from 29.4 bps in June 2019 to end the year with a yield of 1.54 percent 2019.

The US 10-year Treasury note yield fell by 1.44 percent from 2.01 percent in June 2019 to 1.92 percent in December 2019, while the yield of the 2-year note fell by 19.1 percent from 1.75 percent in June 2019 to 1.57 percent at year-end leading to a steepening of the yield curve.

The report notes that, among the reasons accounting for the changes in the yield were diminished trade tensions with China, dissipation of a no-deal Brexit, stable inflation albeit below the FOMC two percent target, a robust job market and generally renewed confidence in the economic growth outlook.

Outlook for 2020

The forecasts for 2020 and 2021 have been marked down by 0.1 and 0.2 percentage points respectively, predominantly reflecting negative surprises to the global economic outlook, such as the novel coronavirus.

Global growth has also moderated amid weak growth in the Eurozone, concerns about China’s greater-than-envisaged growth slowdown outlook, social unrest in Hong Kong, escalating geopolitical tension in the Middle East between the United States and Iran and further trade policy uncertainties between the United States and its trading allies.

The crystallization of these risks has in the near to medium term created a flight to quality with safe haven bond yields falling and this is impacting positively on the marked-to-market valuations of the portfolios of the Ghana Petroleum Funds.