A new World Bank budget support of US$100m negotiated and sealed in Washington on January 26, 2012 makes extensive provisions for making further progress towards an effective, transparent and accountable management of Ghana’s petroleum resources.
The grant which comes as the eighth successive budget support to Ghana’s poverty reduction efforts was processed within the harmonized Multi Donor Budget Support (MDBS) framework. It supports the implementation of the Ghana Shared Growth and Development Agenda (GSGDA 2010-2013), which succeeded the second Growth and Poverty Reduction Strategy (GPRS2).
The GSGDA emphasizes the need for macroeconomic stabilization, greater public sector efficiency and executive transparency and accountability to provide the adequate setting for the reduction of poverty and socio-economic inequalities through agricultural, private sector, infrastructure and human resource development.
The grant requires the Ghana government to take steps to establish an independent petroleum regulatory commission, ensure a timely and regular reports of petroleum related revenues and expenditures through the extension of the Ghana Extractive Industries Transparency Initiative to the oil and gas sector, and for restoring financial vitality and operational efficiency in the Tema oil Refinery. It also makes a general demand for the adoption of an action plan for the continued overhaul, divestiture or commercialization of State Owned Enterprises.
the adoption of an action plan for the continued overhaul, divestiture or commercialization of State Owned Enterprises.
Given that the government inaugurated the National Petroleum Commission during the last quarter of 2011, it is believed that the Bank will be interested in the development of regulations that will give proper effect to the law establishing the Commission. With the extension of the Ghana EITI to the oil and gas sector, Public Agenda can report that plans are far advanced in this regard; that a road map has been agreed on by the relevant stakeholders, a Terms of reference for Oil and Gas EITI audit has been negotiated and firmed up in readiness for the recruitment of an aggregator to undertake the audit. The quality of the report, access to its content, and the public debate around it are what in the view of the Public Agenda, will be of prime importance to the Bank.
The requirement in respect of Tema Oil Refinery represents a shift from an earlier insistence of the Bank to off-load government’s interest in it to a strategic investor. Government now has the space to consult with its citizens and to explore other viable alternatives to privatizing TOR, including the possibility of off-loading government’s interest in it to Ghanaians through the stock exchange.
It is clear, however, that the Bank remains committed to its policy of cost recovery in the energy sector, as it requires government to establish and implement an electricity automatic tariff adjustment mechanism, which many say will put the cost of electricity beyond the reach of many poor households.
In what can be described as an apparent admission that most social protection intervention haven’t been effective, the World Bank is requiring the government of Ghana to test and validate the common targeting mechanism for major social protection programs. Most Ghanaians, Public Agenda’s investigations have revealed, are ignorant of the existence of a common targeting mechanism for major social protection programs.
The Institute of Fiscal Policy of the Integrated Social Development Centre say, it is imperative that the citizens have a say in the design of tools meant to provide feedback on the effect of social protection targeting. “It is a right derived from the peoples’ right to participate in decisions affecting them” said Mrs. Philomena Johnson, Director of the IFP.
The new Poverty Reduction Support Grant also makes specific references to continuing and deepening efforts initiated since 2009 to restore budgetary discipline and financial stability and (ii) foster public sector reform and strengthen sustainability in the energy sector, while (iii) protecting the poor.
The support broadly aims at preventing the accumulation of new public expenditure arrears and adopting a second financial sector development strategy; implementing the decentralization policy particularly the composite budgeting framework of the district assemblies.
Ghana’s Finance Minister, Dr. Kwabena Dufour, admits that his “Government has a tall order of reducing maternal mortality, eliminating extreme poverty, ensuring sustainable poverty reduction, as well as creating the conditions necessary for prosperity in the country. The PRSG8 support, he says, will greatly facilitate the achievement of these goals.”
Among the expected outcomes after the implementation of the PRSG8 are: a reduction in the stock of public arrears and non-performing loans in the banking sector; the implementation of a number of performance contracts for Subvented Agencies, an increase in the number of districts with effective composite budgeting, the reduction of operational subsidies to power utilities, the reduction of operational losses at the Tema Oil Refinery (TOR), the identification of newly enrolled regular beneficiaries of the Livelihood Empowerment Against Poverty (LEAP) using the common targeting mechanism, the regular update of the Ghana Extractive Industries Transparency Initiative (GHEITI) reconciliation reports on oil and gas and other mining activities, and the submission of timely quarterly reports on petroleum receipts.
Sebastien Dessus, Lead Economist for the World Bank in Ghana notes that, “The PRSG8 concluded a series of budget support operations (EGPRC, PRSC7) started in 2009 to support Ghana’s macroeconomic stabilization efforts and the development of the oil and gas legal and regulatory framework. Having regained fiscal space and become a middle income country, Ghana’s challenge is now to take full advantage of its current oil-driven economic boom to decisively propel its economy to a higher development and poverty reduction trajectory, through wise and transformative investments, accelerated policy reform implementation, and the strengthening of accountability mechanisms.
The operation seeks to provide objective information and foster a dialogue among a range of civil society organizations, academics, direct stakeholders, development partners and the Government in these domains.”
Source: Pubic Agenda
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