Heritage Fund not an option in funding free SHS policy - Finance Minister

February 17, 2017
Source: Norvan Acquah - Hayford/thebftonline.com/Ghana
Heritage Fund not an option in funding free SHS policy - Finance Minister

Ghana’s Finance Minister, Ken Ofori-Attah, has calmed tempers by stating categorically that the NPP government is not going to use proceeds from the Heritage Fund to support the free Senior High School (SHS) policy.

According to the Finance Minister, the Heritage Fund has not even been considered as one of the funding options for the government’s flagship educational programme.

“We are not going to touch the Heritage Fund to support the free SHS education. I think we have enough resource in our envelopes to be able to do it without touching the Heritage Fund. We will not touch the Heritage Fund for the free SHS.”

His comment puts to rest the confusion on whether or not it is right for the government to use the Heritage Fund to finance its foremost campaign promise of “Free SHS” and sought to draw out confidence in government.

Senior Minister Yaw Osafo Maafo generated the huge public outcry when he hinted that government was considering the Heritage Fund as an option to finance the education policy slated for the 2017/2018 academic year.

His suggestion has seen a strong opposition from different fronts.

But Mr. Ofori – Atta has been quick to state that, “as far as I know the Senior Minister did not say we will finance the free SHS with the Heritage Fund. He alluded at looking at other options for us to be able to finance the free SHS.”

The Heritage Fund is an endowment reserve established to support the development for future generations when Ghana’s petroleum reserves have been depleted, according to the Petroleum Revenue Management Act of 2011.

The Petroleum Act also provides that 21% of annual oil revenues should go into a Stabilisation Fund to support the economy in dire times, while 70% should be used to support the Annual Budget Fund Amount (ABFA).  

Meanwhile the proponents of the amendment of the Petroleum Revenue Management Act (Act 815), such as the Institute for Fiscal Studies (IFS), argue that the Ghana Petroleum Funds, which include the Stabilisation Fund and the Heritage Fund, have too high opportunity costs as their returns are next to nothing.

According to the Bank of Ghana, which manages the Petroleum Funds, since 2012, the highest net rate of return the two funds have attracted was 1.1 percent in 2014, while on the average, since 2012, the funds have attracted a combined interest of a paltry 0.68 percent.

The latest report on the Petroleum Funds published by the central bank shows that as at December 30, 2016, the Ghana Heritage Fund had a closing book value of US$277 million, with a negative 2.99 percent return.

The Ghana Stabilisation Fund, on the other hand, had a closing book value of US$207 million, attracting 0.24 percent interest for the second quarter of last year. Since their inception in 2012, the funds have been able to accumulate US$18.9 million in returns.

Whilst government has funds locked in the two funds, it has had to contend with exorbitant interest rates on its external borrowing. For instance, government borrowed US$1 billion in 2015 at an interest rate of 10.75 percent, while its US$500 million in the two funds attracted a rate of return of 0.7 percent.