Ghana’s debt from 2011 to 2014 is about 11 times total petroleum savings within the same period, records have shown.
Analysis from the country’s annual budgets indicates that Ghana’s debt shot up from about $15.3 billion ($15,350,080,000) in 2011, to about $21.7 billion ($21,733,510,000) as at September 2014.This resulted in an increase of about $6.3 billion ($6,383,430,000) within the period.
Total petroleum savings in the Stabilization and Heritage Funds within the same period however stood at about $535 million ($535,559,264).
According to the Bank of Ghana (BoG), the country has borrowed an additional GHC 12.1 billion in the first quarter of 2015 alone, pushing the debt stock higher.
Government’s growing debt as against low savings of petroleum revenues gives indication of reduction in the country’s wealth and its inability to properly deal with oil price shocks on the world market.
This worrying trend brings to the fore the debate of whether it is prudent to place a ceiling on the Stabilization Fund in order to use excesses of savings for debt payments and allocations into the Contingency Fund.
The minister of finance, last year, in an attempt to interpret section 23 (3) of the Petroleum Revenue Management Act (PRMA), placed a $250 million ceiling on the Stabilization Fund, thus restricting inflows to the fund.
Some observers in the oil and gas industry therefore believe that the country’s budget may be disrupted in times of drastic crude oil price fall on the international market since government may not have adequate resources from the Stabilization Fund to deal with the situation.
This prediction apparently manifested this year when the price of Brent crude oil dropped from $115 per barrel in June 2014 to $49 per barrel as at January 2015, sending government’s budget astray. The PRMA is currently before parliament pending amendment.
Meanwhile, the issue on the capping of the Stabilization Fund in order to use savings excesses to finance government’s debt and have allocations to the Contingency Fund continues to linger on.
Also, some economists have questioned the appropriateness to set up Sovereign Wealth Funds like the Stabilization and Heritage Funds, when there is a large budget deficit driving debt accumulation at a much more rapid and larger pace than petroleum savings
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