Should Ghana Borrow from the Heritage Fund or IMF to Support Economy?

The Head of Research at the Trades Union Congress, TUC, Dr. Kwabena Nyarko Otoo, has due to the impact of the coronavirus pandemic on the Ghanaian economy, asked government to save jobs and the economy by injecting about 18 billion cedis into the economy.

Upon evaluating on how the government has been put in a tight corner in terms of finding funds to support the economy, Dr. Nyarko Otoo said government can either print more money or borrow from the Ghana Heritage Fund, GHF, to support the economy at this moment.

In an interview, he said: “…government can borrow from the Heritage Fund to support the economy.”

Dr. Nyarko Otoo also stated that he believes it is much safer to borrow from the Heritage Fund than to borrow from the International Monetary Fund, IMF.

Dr. Kwabena Nyarko Otoo

 “We went to borrow from the IMF with all the conditionality. If we were able to borrow from the IMF, it should be safer to ask government to borrow from the future. So that we replenish that fund when the COVID- storm is over.”

Government plans to dip into the Heritage Fund

The Finance Minister, Ken Ofori-Atta on Monday, March 30, 2020, during an address to Parliament on how the government plans to raise funds to fight the coronavirus pandemic and its impacts on the economy, told Parliament that government plans to amend the Petroleum Revenue Management Act, PRMA, through Parliament to enable government to withdraw funds from the GHF to undertake emergency expenditures as the country was in dire need at the time.

The Finance minister revealed that there is an estimated US$591.1 million in the Ghana Heritage Fund.

“Amend the PRMA to allow a withdrawal from the Ghana Heritage Fund to undertake emergency expenditures in periods of national emergency. There is an estimated US$591.1 million in the Ghana Heritage Fund,” the Finance Minister said.

“…lower the cap on the Ghana Stabilisation Fund (GSF) from the current US$300 million to US$100 million in accordance with Section 23 (3) of the Petroleum Revenue Management Act (PRMA). This measure will enable the excess amount in the GSF account over the US$100 million cap to be transferred into the Contingency Fund, consistent with Section 23 (4) of the PRMA…the amount transferred into the Contingency Fund will be used to fund the Coronavirus Alleviation Programme (CAP). Through this process, an estimated GH?1,250 million will be transferred into the Contingency Fund to Fund the CAP,” he added.

Some CSOs oppose the decision

However, some Civil Society Organisations, CSOs, including the Africa Centre for Energy Policy, ACEP,  Civil Society Platform on Oil and Gas in Ghana, CSPOG, the Institute for Energy Security, IES, among others cautioned government to desist from touching the Fund and should rather look for other sources for resources to fund the Coronavirus Alleviation Programme, CAP. According to most of the CSO, the Ghana Heritage Fund is meant for future generations to fall on when all the country’s oil reserves have been depleted.