The Minority in Parliament has indicated that it will fiercely oppose the government’s proposal to use part of the Heritage Fund to help in financing the fight against the global pandemic, COVID-19 in the country.
This was after the Finance Minister, Ken Ofori-Atta earlier today, Monday, March 30, 2020, presented a proposal for the amendment of the Petroleum Revenue Management Act to give to the government to utilize portions of the Heritage Fund.
On the plate of the Minority, it believes it was not the best time to use the country’s Heritage Fund which is meant for future generations.
Following the fourth address by President Nana Akufo-Addo to the nation on governments efforts put in place to curb the spread of the Coronavirus in the country on Friday, March 27, 2020, he said he has instructed the Finance Minister to make available, a sum of GH¢1 billion as part of efforts to lessen the impact of COVID-19 on businesses and households to ensure that the loss of jobs is minimized.
But on the floor of Parliament, the Minority Leader, Haruna Iddrisu contended that the government’s financial programmes must directly affect the ordinary Ghanaian.
“There is no difficulty in giving him (Finance Minister) approval to use the stabilization Fund but what we are saying is that the Heritage Fund was set out for a purpose and we are not there yet. So, make use of the stabilization reserve to support your activities and not the Heritage Fund,” Haruna Iddrisu said.
About the Heritage Fund
The Heritage Fund is a section, specifically section 10 within the Petroleum Revenue Management Act 815 which was enacted in 2011.
The purpose is to provide an endowment fund to support the development of future generations when the petroleum reserves have been depleted according to Act 815 (2011) and amended Act 893 (2015).
The fund receives a percentage of oil revenue accumulated to the Petroleum Holding Fund.
In view of this Parliament of Ghana pegged this figure at 9%. This means that out of the total oil revenue received into the Petroleum Holding Fund the Heritage Fund receives only 9%.
How much will COVID-19 cost Ghana?
According to the Finance Minister, Ken Ofori Atta, the COVID-19 pandemic is likely to cost the country some GH¢9.505 billion, representing 2.5 per cent of Ghana’s reviewed GDP.
“Mr Speaker, the total estimated fiscal impact from the shortfall in petroleum receipts, shortfall import duties, the shortfall in other tax revenues, the cost of the preparedness plan, and the cost of Coronavirus Alleviation Programme is GHS9.505 billion,” he said when he appeared in Parliament today, Monday.
According to the Finance Minister, in addressing issues of the impact of the coronavirus on the financial Sector and Financing Conditions, he said the virus has led to tight financing conditions within the financial market.
“The slowdown in economic activities is likely to result in debt service difficulties (especially from the sectors that are hard hit such as aviation and hospitality) and containment measures such as social distancing may lead to reduced productivity and job losses. COVID 19 has also sparked off capital flight as a result of related bearish emerging market sentiments and given the high proportion (about 25%) of local bonds held by non-resident investors.” Ofori Atta said
He further said the financial sector is seeing high demands for the dollar, a move that can negatively affect the foreign reserves.
“We are seeing an increase in demand for dollars which could impact negatively on foreign reserves. Ghana’s successful and timely raising of US$3bn from the Eurobond market in early February this year has been extremely, may I say, divinely helpful and provided us with the needed buffer to anchor the cedi. However, in these apocalyptic times, we must do all we can to conserve and preserve our foreign exchange reserves.”
Government seeks IMF support to help fight COVID-19
Already, the International Monetary Fund (IMF) has said Ghana is eligible to access a concessionary emergency funding up to $500 million dollars to fight against the novel coronavirus and its impact on the economy.
According to the Resident Representative of IMF in Ghana, Dr Albert Touna-Mama, the funding repayments will begin after five and a half years with a zero-interest rate with an authorized delay.
“We don’t yet have a final figure on the request for Ghana; we are working with the authorities to evaluate this. However, in general, the guide announced by the IMF for emergency funding is 50 per cent of quota. For Ghana, this is SDR 369 million or about $500 million,” he yesterday, March 26, 2020.