The Africa Centre for Energy Policy (ACEP) has predicted a significant fall in the government of Ghana’s projected revenue for the year 2020.
According to ACEP, based on the average price prediction of $40 per barrel for crude oil in 2020, Ghana could realise $743 million from crude oil sales this year.
This is against the expected $1.567 billion, anchored on a price prediction of $62.61 per barrel, according to the 2020 Budget.
The shortfall is about 53% and is expected to affect the fiscal economy significantly [physical infrastructure and debt servicing].
Ghana’s infrastructure development programme is heavily dependent on oil revenues; about 80% of the government’s domestic revenue for its capital budget is to be sourced from the Annual Budget Funding Amount (ABFA).
In its analysis of the implications of COVID-19 on oil-producing countries, ACEP said its estimates show that the maximum allocation to the ABFA for the year in line with the Petroleum Revenue Management Act (PRMA) will significantly drop from $761 million to about $273 million. This will represent a shortfall of about 64%.
This shortfall of $488 million it said cannot be smoothened by the Ghana Stabilisation Fund (GSF) established by the PRMA.
At a standing balance of $300 million, the maximum withdrawal from the GSF compliant with the PRMA will be about $243 million, it explained.
Government’s projected transfers into GSF in 2020 is $228 million. Given that GSF is capped at $300 million, ACEP said the $228 million would have been excess over the cap and available for debt service and/or contingency, in compliance with the PRMA.
“Over the years, excess over the cap has been used largely for debt service which indicates that the $228 million, which is about 5.7% of the programmed expenditure for interest payment in 2020, will not be available for debt service,” it said.
ACEP, hence, recommends that the governments ensure the transmission of the lower oil price to support industry and consumers of petroleum products.