After government failing on two consecutive occasions to make an allocation from the Annual Budget Funding Amount (ABFA) to the Ghana Infrastructure Investment Fund (GIIF), it has stated in its 2021 mid-year budget review that it will be banking hopes on the fund to accelerate infrastructure development.
As a result, it is allocating an extra 20 percent of the ABFA – the portion of petroleum revenue used to support government’s budget – into the fund’s coffers.
The Ghana Infrastructure Investment Fund (GIIF) was established to mobilise, manage, coordinate and provide financial resources for investments in infrastructure projects and ease the burden of quasi-public debt on the budget.
Last year, the Public Interest and Accountability Committee (PIAC) expressed worry over the non-allocation of funds to GIFF; saying the development was a contravention of the laws governing the use of oil funds.
It was more worried because the fund made good returns – raking in US$5.5million profit on its investment in the 30-million-dollar Kotoka International Airport (KIA) terminal 3 project in three years.
It seems government took good notice of PIAC’s concerns, as it has announced that it intends to use GIIF as a vehicle under its economic recovery Ghana CARES programme to drive structural transformation through funding for critical infrastructures such as Agenda 111, quality and affordable housing, improved rail and road networks, and ICT infrastructure.
Already, GIIF has been a success in restructuring and refinancing expensive debt of the Independent Power Producers in the energy sector, as well as taking an equity position in some cases to help reduce the fiscal burden of overcapacity charges the nation is grappling with.
The finance minister during his presentation of the mid-year budget review stated that, already, the earmarked funds Act has been revised to allow a twenty percent increase in the allocation of ABFA capex to GIIF.
Section 21(4)(b) of the Petroleum Revenue Management (Amendment) Act, 2015 (Act 893), and Section 5(1)(b) of the Ghana Infrastructure Investment Fund Act, 2014 (Act 877), provide that a maximum 25 percent of the amount allocated for Public Investment Expenditure under the ABFA shall be allocated to GIIF for infrastructural development.
The revision means that the allocation to GIFF will see a twenty percent increase.
“Over the last decade, we have witnessed an increasing trend wherein Sovereign Funds have been deployed as catalysts for growth and development in emerging markets such as Asia and the Middle East. This is also beginning to be adopted in Africa, and the government of Ghana intends allowing GIIF to increasingly play a similar role for Ghana.
“Government intends to reduce our infrastructure gap by enabling GIIF to drive sizeable but economically viable infrastructure projects to conclusion, which will also create additional fiscal space for government to operate in,” the minister said.
GIIF, established by Act 877 of 2014, received its first allocation from the ABFA in 2015.