The PRMA as Ghana’s Petroleum-Based Sovereign Wealth Fund (SWF): Fiscal Framework and Performance

This chapter reviews the fiscal framework and performance of Ghana’s Petroleum Sovereign Wealth Fund (SWF). The arrangements under the PRMA are to ensure a delicate but important balance of fiscal goals that include savings, spending, fiscal stabilization, debt management, investment or development, and crisis management. However, this fiscal balance is often at risk, mainly due to unplanned political economy mandates and testing the boundaries of ministerial discretion. A major cause of fiscal overruns, pressure on statutory funds, and inappropriate use of oil revenues are unplanned political economy promises. Often, these ambitious and expansionary expenditures lack clear fiscal mandates or budget provisions for achieving them. This threatens to put the Act along the same path as the failed pre-PRMA prioritization of spending under the 1992 Constitution. In line with Ghana’s lower-middle-income status, it is necessary to adopt the appropriate International Public-Sector Accounting Standards (IPSAS) under the PFM or GIFMIS reforms—as part of the proper accounting and classification of assets, investments, reserves, or liabilities in the Public Accounts, Budgets, and other financial statements. There is also a need for supporting promises with clear revenue-raising or cost-cutting measures to preserve budget thresholds for existing expenditure. These include the preservation of fixed percentages of revenue allocated for compensation, amortization, transfers, and “pipeline” or ongoing capital projects. To protect the efficient use of the petroleum resources, the Public Financial Management Act, 2016 (Act 921) must be amended to ensure that proponents give the source of funds for political promises. As we wait for the 25-year PRMA review period, one generation should not live off the sacrifices of predecessors who also had “current budget needs”. Ghana should aim to preserve a principal sum in the Heritage Fund and utilize part of the interest earned to boost investments, preferably through the Ghana Infrastructure Investment Fund (GIIF).