Did Gov’t really breach the PRMA? – PIAC Clarifies Position

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The Public Interest and Accountability Committee’s (PIAC) attention has been drawn to a publication in the Daily Graphic of Wednesday, 27th June, 2018 titled, “PIAC GOT IT WRONG.” In the said publication, the Minister for Information, Dr. Mustapha Abdul Hamid, is reported to have expressed disagreement with the view expressed in the Committee’s 2017 Annual Report on the management and use of petroleum revenues, specifically, with reference to PIAC’s position that the Government breached Section 21(4) of the Petroleum Revenue Management Act, 2011 (Act 815) in its expenditure of the Annual Budget Funding Amount (ABFA) for the year 2017. The Committee wishes to take this opportunity to clarify the issues that lie at the heart of this disagreement.

From PIAC’s analyses of the 2017 data on the management and use of petroleum revenues supplied by the Ministry of Finance, it emerged that out of the GH¢736.03 million ABFA budgeted for use for various earmarked projects and expenditures for the year, the government spent GH¢332.29 million, leaving an unspent amount of GH¢403.74 million. This fact in itself raises first and foremost, concerns about the level of budget compliance with respect to the ABFA allocation, and secondly, about the country’s absorptive capacity, presuming that the money has indeed not been utilised.

Furthermore, the analyses revealed that out of the GH¢332.29 million spent, GH¢202.38 million went into the Free SHS programme and scholarships, which are undoubtedly recurrent expenditure. This, when added to expenditures from other priority areas, constitutes sixty-three percent (63%) of Government’s utilisation of ABFA on recurrent items. In other words, only thirty-seven percent (37%) was spent on capital investments, which is inconsistent with the provisions of the PRMA.  It bears noting that the rationale for having such a provision in place is to ensure that a greater portion of the petroleum revenue will be directed towards the undertaking of infrastructural projects/public investments that would further development in the country, and help the country to avoid the bad experience in the mining sector, where revenues have been spent consistently for decades on recurrent expenditures, as a result of which the sector has not been able to make any significant contribution to the development of the country.

The Disputed Interpretation

We note that the Government’s disagreement with PIAC’s position is hinged on its (government’s) interpretation of Sect. 21(4) of the PRMA, which states: “For any financial year, a minimum of seventy percent of the Annual Budget Funding Amount shall be used for public investment expenditures consistent with the long-term national development plan or with subsection (3)”.

The Hon. Minister for Information indeed notes in his response published in the Daily Graphic, that: “From the foregoing, it is clear that PIAC’s interpretation of Sect. 41(4) (sic) of the PRMA relates to the amount spent, rather than the amount received”, and that, “the law does not refer to expenditure but the ABFA in its totality”.

If the Government’s interpretation of this provision is sustained, what it will mean is that, in preparing its budget, the Government can make the effort to comply with the face value of the provision, but when it comes to actual practice/expenditure, it can deviate and do as it pleases, making nonsense of the intent of the provision. Such a view is not ONLY dangerous BUT portends great risk of political abuse of petroleum revenues, in ways that could undermine the efficiency of ABFA utilisation.

PIAC believes that the presumption in that provision was the full utilisation of the entire ABFA allocation for that year with the purpose being a greater portion spent on capital and not recurrent expenditure. It is thus unfortunate that the government does not see anything wrong with not complying with the approved ABFA allocation. Using its inability to spend as justification for compliance with the law and the budget is worrying.

The Unspent Amount

The Minister for Information, in his submission, also gave assurance of the availability of the unspent amount of GH¢403.74million. While we have no reason to doubt the Honourable Minister, PIAC believes the course of transparency and accountability will be better served by providing further and better particulars of where the money has been lodged. Again, it is pertinent to note that since the said GH¢736.03 million ABFA allocation was made from the Petroleum Holding Fund, it is only proper to have returned the unspent portion to chest for re-budgeting in the ensuing  year.

Creeping Nature of the Problem

It is important to observe that, this is not the first time the allocated ABFA has not been fully utilised. In 2016, an amount of GH¢77 million was not spent. No explanation was given, and in 2017, the unspent amount jumped from GH¢77 million to GH¢403.74 million. PIAC is concerned that, if not checked, this development can provide cover for abuse of the petroleum revenues.

Signed,

Chairman

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