The projected US$1,150.84million total petroleum receipt set by government as the 2020 Benchmark Revenue will not be realized due to impacts of the novel coronavirus (COVID-19), the Minister of Finance and Economic Planning, Ken Ofori Atta, has said.
The total petroleum revenue comprises estimated royalties of US$226.85million; carried and participating interest of US$598.22million; Corporate Income Tax of US$324.45million; and Surface Rentals of US$1.32million.
The development is likely to impact the execution of a number of projects and other government businesses in view of the shortfalls that are expected to be encountered in transfers, particularly to the Annual Budget Funding Amount (ABFA).
For instance, government had proposed to allocate 70 percent of the Benchmark Revenue of US$818.68million, which is US$573.08million, to the ABFA.
Mr. Ofori-Atta, addressing Parliament on ‘Economic Impact of the COVID-19 pandemic on the Economy of Ghana’ said: “Government programmed a crude oil price of US$62.60 per barrel for the 2020 Budget, consistent with the PRMA (Act 815)”.
He however noted that the global crude oil price has declined significantly since outbreak of the coronavirus; for instance, bringing crude oil prices (Brent) down to US$22.9 per barre, as at March 30, 2020, from the December 2019 price of US$65.9 per barrel.
It is against this backdrop that the finance minister explained that with the preliminary analysis showing an average crude oil price of US$30 per barrel for year 2020, “government will register a shortfall in crude oil receipts amounting to GHȼ5,679million.”
“The corresponding projected shortfall in Annual Budget Funding Amount (ABFA) is GHȼ3,526million; while shortfalls in the Ghana Stabilisation Fund and Ghana Heritage Fund are GHȼ1,058million and GHȼ453million, respectively. Projected shortfalls in transfers to GNPC is GHȼ642million,” he stated.
Prior to this, the finance minister had earlier informed Parliament that even though events of the coronavirus are still unfolding, the preliminary analysis undertaken by the Ministry of Finance shows that the coronavirus will impact negatively on petroleum receipts.
He attributed this to the collapse of international crude oil prices, Customs receipts, other receipts; as well as expenditures, especially health-related, and financing conditions on the fiscal front. He said, more generally, it is affecting tourism, travel and conferences, FDI, international trade, food and nutrition, and poverty reduction.
However, he noted that measures are being put in place to close a possible financing gap in the 2020 Budget that could result from impacts of the coronavirus. “These measures include withdrawal from the Ghana Stabilisation Fund occasioned by anticipated shortfalls in the Annual Budget Funding Amount (ABFA).”
Speaking in Parliament on Monday, Mr. Ofori-Atta outlined some fiscal measures to mitigate impacts from the coronavirus pandemic for the consideration of the House. These include lowering the cap on the Ghana Stabilisation Fund (GSF) from the current US$300million to US$100million, in accordance with Section 23 (3) of the Petroleum Revenue Management Act (PRMA).
According to the minister, “This measure will enable the excess amount in the GSF account over the US$100million cap to be transferred into the Contingency Fund, consistent with Section 23 (4) of the PRMA”.