Current position on Heritage Fund baffling, economically imprudent – Baah-Nuakoh

Dr. Kwame Baah-Nuakoh
  • likens it to opening savings account with credit card
  • calls for dispassionate discourse on the subject

Economist Dr. Kwame Baah-Nuakoh has described as ‘baffling’ and ‘economically imprudent’ the current position of several economic actors on the Ghana Heritage Fund (GHF) – at a time when the nation is saddled with high infrastructure and public investment deficits and uses a chunk of its revenue to service debt.

According to Dr. Baah-Nuakoh – a former lecturer of the Economics Department at the University of Ghana, Legon – the position of analysts, economists and other players in the economy who believe the Heritage Fund should not be touched for current expenditure is akin to using a credit card to open a savings account.

In his estimation, it beggars belief that a fund set aside for ‘future generations’ would be domiciled in other jurisdictions and be earning returns at rates significantly lower than that which government is charged when it floats debt, locally or internationally.

Speaking of the Fund – which had a value of US$608,543,076.25 at the end of June 2020, per the Bank of Ghana’s Petroleum Holding Fund & Ghana Petroleum Funds Semi Annual Report -Dr. Baah-Nuakoh said: “If the Heritage Fund is giving us 5% per annum, and we are borrowing at 19%, why can’t we ourselves borrow from it at 10%?

“If we believe we have the discipline enough to pay back and reduce the amount and cost of external borrowing, why are we not borrowing from the Heritage Fund instead at a much cheaper rate? When you are a net borrower, to the extent that we are, it makes little economic sense to talk much of savings. At any rate, government meets its obligations on Treasury-bills and bonds.”

Touching on the argument that the Heritage Fund is reserved for the ‘future generation’ he said there is no point saving for them while encumbering them with increasing debt. He therefore called for a dispassionate discourse on the subject matter, believing this will lead to a reconsideration of the current position.

Norway’s pathway

The economist also addressed the oft-cited example of Norway’s Government Pension Fund, Global, the world’s largest sovereign wealth fund. As at February 2021, the fund – also called the oil fund – contained an estimated US$1.1trillion. It is therefore held up as the gold standard for a sovereign wealth fund, especially those set up by oil revenue.

Dr. Baah-Nuakoah however stated that while it is laudable to follow Norway’s example in the setting up of a petroleum fund, it must not be done without looking at other steps Norway took – including setting up the fund decades after it began exporting oil in commercial quantities, but more importantly after it had eliminated its public investment and infrastructure deficits.

“Norway found oil in 1967 and it took Norway almost 25 years to set up its oil revenue fund, and more than 30 years before the first money transfer to the fund. It invested in its economy and got to a point where returns on the extra dollar of investment in infrastructure was so low that it was comparable to, if not lower than, the savings rate. Even if Norway saves at 3%, it will be a higher return than on public investment or infrastructure, as they have done all they require,” he explained.


The GHF was established under the Petroleum Revenue Management Act (PRMA) 2011, Act 815 with an Amendment in 2015. The GHF seeks to provide an endowment to support development for ‘future generations’ when petroleum reserves and receipts have been depleted. There have been attempts by successive governments to access the GHF, most recently to mitigate effects of the ongoing pandemic.

While opinions varied, the general consensus is that the GHF should remain untouched. Notably, the Public Interest and Accountability Committee in a position statement dated April 6, 2020 stated: “The proposals put forward by government would involve an amendment of the PRMA. Any amendment of the PRMA would come across as reactionary and a risky option, which when unchecked could provide a recipe for abuse of the intent of the law at the least opportunity.

“Accessing the Heritage Fund will not only dim the spirit of the law but also derail the country’s intended purpose of applying international best governance practices to our Hydrocarbon Resources. PIAC posits that the country risks slipping back into the very terrain which necessitated promulgation of the Petroleum Revenue Management Act in 2011.”

Subsequent to a number of recommendations, it concluded the statement with: “…having made these recommendations, PIAC strongly urges government not to disturb the arrangements which underpin the PRMA”.

According to the Bank of Ghana Petroleum Holding Fund & Ghana Petroleum Funds Semi-Annual Report for Jan 01 – Jun 30, 2020, total return on investment of the Ghana Heritage Fund (GHF) year to date (YTD), (1st half of 2020) was 5.28% as compared to 4.71% (1st half of 2019). The two-year annualised return (2Y (A)) of GHF was 6.58% while the three-year annualised return (3Y (A)) was 4.26%.

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