Petroleum Revenue Management Act of 2011
The Petroleum Revenue Management Act (PRMA) was passed by the Ghanaian Parliament in April 2011 with the stated goal of providing a framework for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner.
The bill received substantial contributions from civil society organisations (CSOs) and, according to website Ghana Oil Online, sets one of the highest standards for transparency in the management of petroleum revenues. Civil society group Revenue Watch Institute, commenting on a draft of the bill presented to parliament in August 2010, commended the bill's "strong oversight and transparency provisions" and noted that it had been "significantly informed and enriched by the wide consultation process developed by the Government of Ghana".
Features of the law
The bill outlines clear rules for petroleum revenue inflows and outflows, establishing a Petroleum Holding Fund (PHF) to receive and disburse all petroleum revenues. From this holding fund, 70 percent of oil revenues are to be disbursed to the government budget, with the remaining 30 percent deposited in two newly created funds, the Heritage and Stabilisation funds, respectively.
The objective of the Ghana Stabilization Fund is to sustain public expenditure capacity during periods of unanticipated revenue shortfalls, while the Ghana Heritage Fund provides an endowment to support development for future generations when Ghana's petroleum resources are depleted. In percentage terms, the Stabilization and Heritage funds are to receive 21 percent and 9 percent of total oil revenues, respectively.
Transparency and accountability
The PRMA provides for reporting on multiple levels, with reporting authorities including the Ghana Revenue Authority, the Ministry of Finance and Economic Planning, the Bank of Ghana, the Investment Advisory Committee, the Auditor-General, and the Public Interest and Accountability Committee. Specifically, the Bank of Ghana is to conduct internal audits of Ghana's petroleum funds, while the Auditor-General conducts external audits. The Public Interest and Accountability Committee, a new body comprised of citizens responsible for independent oversight of the management of petroleum revenues, is to publish semi-annual and annual reports in two state-owned newspapers and online, and hold meetings twice every year to discuss the reports with the public.
Multiple clauses deal with the issue of transparency:
- Clause 8 requires the publication of records of petroleum receipts in the newspapers and online.
- Clause 16 requires the Minister of Finance to reconcile quarterly petroleum receipts and expenditures.
- Clauses 46 to 48 provide for four different types of audits of the petroleum accounts: internal, external, annual and special.
- Clause 50 requires the Minister of Finance to submit to Parliament an annual report on the Petroleum Account and the Ghana Petroleum Funds
- Clause 51 provides that information or data that could impact the performance of the Ghana Petroleum Fund if disclosed may be declared by the Minister as confidential, subject to the approval of Parliament.
- Clause 52 criminalises the failure by a person to comply with the obligation to publish information under the bill.
- Clause 53 provides for the establishment of the Public Interest and Accountability Committee.
Criticism and debates
Though widely praised, two aspects of the law have led to pointed debate: the establishment of the Heritage Fund and the collateralisation of petroleum revenues, referring to a process in which the government uses its petroleum revenues as collateral if it defaults on a loan. According to Mohammed Amin Adam of Ghana Oil Online, some observers have questioned the diversion of 9% of all petroleum revenues to the Heritage Fund, whose objective is to provide funds for future generations, at a time when Ghana faces serious developmental challenges in the present. It remains unclear whether the Heritage Fund's investments will actually bring substantial benefits to future generations, and whether this will impact Ghana's ability to develop in the near-term.
Clause 5, regarding the collateralisation of petroleum revenues, is one of the most debated and highly politicised in the law. The original provision prohibited collateralisation, but a subsequent amendment provided that Ghana's petroleum revenues could be collateralised. Government supporters of collateralisation have argued that the security of development financing depends on the ability to use oil revenues as collateral; but opponents have warned that this could lead to inflation associated with "dutch disease" and eventually bring on the effects of the resource curse.
Civil society group The Access Initiative has pointed to other potential issues of the law, including the fact that there is nothing in the law to prevent revenues from being spent on paying back loans not affiliated with oil production, meaning that the 70% of oil profits earmarked for paying off debt could actually encourage unsustainable borrowing.
Petroleum Revenue Management Act, 2011 politicsofpoverty.oxfamamerica.org/wp-content/uploads/2011/05/Petroluem-Revenue-Management-Act815-2011-.pdf
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- "Management bill promises greater transparency and accountability: Commentary" Ghana Oil Online, 8 March 2011.
- "Comments on Ghana’s Petroleum Revenue Management Bill" Revenue Watch Institute, August 2010.
- "UPDATE 2-Ghana passes oil bill, first payments due soon" Reuters, 2 March 2011.
- "Oil and the 2012 Budget Statement" The Chronicle, Retrieved 13 February 2012.
- "Collateralization" Investopedia, Retrieved 13 February 2012.
- "Spotlight on Ghanaian Oil & Revenue Management" The Access Initiative, 1 August 2011.