Dr Yusif Sulemana, an energy strategist and oil production specialist at Petroleum Development of Oman, has suggested that the budget left a ‘big hole’ without highlighting government’s actions in reviving the Tema Oil Refinery (TOR) considering the dual positive effect on supply bottlenecks and exchange rate volatilities.

While the mid-year budget review emphasized the continuance of the special forex auction mechanism on the basis that it is “expected to sustain continuous supply of petroleum products in Ghana”, Dr Sulemana indicated that it is only a temporary measure- a drop in the ocean. Thus, the premium placed on such an intervention in comparison to speeding up processes in revamping TOR is temporary and unsustainable.

“… These measures [BoG’s special forex auctions] are not sustainable. Because for these measures, we will come back to the same point… We are not doing anything that will ease the perpetual pressure that is currently… on our reserves.”
Dr Sulemana

Dr Sulemana noted that the government needs to fast-track medium-to-long-term measures that will stem the tide, than rather “dressing the situation” with this temporary measure.

According to reports, the forex auction by the BoG only covers one-tenth ($50 million out of $450 million according to June 29, 2022 published forex auction results) of what the Bulk Distribution Companies (BDCs) require to import finished petroleum products into the market.

“The much more sustainable way would have been to take the pressure off our reserves and what we could do is just ensure that part of these products are sourced locally.

“If we do that, I believe it is going to take off some pressure on the dollars but I didn’t see anything substantial to tell consumers that petroleum products are going to be guaranteed at uninterrupted supply at competitive rates.”
Dr Sulemana

Gov’t to use Upstream Sector Windfall to Cushion Budget Deficit

The Minister for Finance, Ken Ofori-Atta, noting the tightened global supply of energy products due to the slew of sanctions imposed on Russia also assured that the “government is closely monitoring the stock of products at all depots”.

The government is cash strapped as major external shocks from the economic fallout of the covid-19 pandemic and the Russia-Ukraine conflict “have led to reduced revenues, increased interest payments and changes in interest rates and exchange rates,” the Minister said.

That notwithstanding, the Minister noted that the government was “…committed to staying within the appropriation for 2022. In spite of the underperforming revenues and strong external headwinds, we are not seeking additional funds in this Mid-Year Review”.

As part of efforts to allow the government some fiscal space to meet its budgetary expenditures, the Minister said:

“We are determined to efficiently use the windfall from the upstream Petroleum Sector to make-up for our revenue shortfall and aggressively improve our revenues even as we rationalise expenditures.”
Ken Ofori-Atta

Though laudable, Dr Sulemana said the government could have extended it to say that the upstream windfalls could be used to moderate the high fuel prices in order to reduce the price pressures at the pump.

The energy expert noted that “…the burning issue at this moment is the high cost of fuel at the pumps… I thought I would have seen cogent measures that are being put in place to stem these high energy prices at the pump,” he puzzled.