Here’s what Ofori-Atta said on Petroleum, Debt, Energy & Mineral Royalties

Mr Ken Ofori-Atta, Minister of Finance

Before speaker Prof. Mike Oquaye, the majority and minority in parliament as well as guests, Ghana’s white apparel loving finance minister, Ken Ofori-Atta read the 2019 Budget Statement and Economic Policy on November 15.

On Revenue from Oil, he submitted:

Government receipts from crude oil liftings for the first 9 months of 2018, from Jubilee, TEN and Sankofa Gye Nyame (SGN) fields, amounted to US$604.09 million (GH₵2.72 billion).

Out of petroleum receipts (i.e. proceeds from Liftings and other petroleum receipts) of US$723.55 million, GNPC (the NOC) was allocated a total of US$223.43 million, comprising Equity Financing Cost (US$149.72 million) and its share of the net Carried and Participating Interest (US$73.71 million). The ABFA received a total of US$176.33 million, while the GPFs received US$323.79 million Public Debt Development

On Debt Level and Management, he stated:

The nominal public debt stock as at end September 2018 was GH¢170.8 billion, comprising external and domestic debt of GH¢86.6 billion and GH¢84.1 billion, respectively. The overall rate of debt accumulation in 2018 is 19.8 percent, driven primarily by the cost of the clean-up of the financial sector, involving resolution of the seven (7) defunct banks. The rate of debt accumulation would have been 11.5 percent without the

Clean-up exercise

Public debt (including financial sector bailout) as a percentage of GDP stood at 70.7 percent at the end of September 2018 compared with 69.2 percent during the same period in 2017. The public debt stock (excluding the financial sector clean-up cost) as a ratio of GDP is 66.5 percent. In terms of the rebased GDP, the public debt to GDP ratio is 57.2 percent (including financial sector clean-up cost) and 53.9 percent (excluding clean-up cost).

In 2018 we continued the clean-up of a heavily indebted energy sector. Following the establishment of the ESLA bond programme in 2017, Government has steadily settled over GH¢5 billion in legacy debts and aged payables towards the goal of a financially viable and competitive power sector. An audit exercise is currently underway to validate the aged payables that were not considered under the ESLA bond. Once confirmed, government will intervene with a combination of cash and bonds to pay off the valid debts. This measure will improve the liquidity position of the energy sector SOEs and ensure long-term financial viability.

On the Energy Sector, he asserted:

Energy Sector Levies

Mr. Speaker, a total amount of GH¢3.5 billion was programmed to be collected in energy sector levies in 2018. At the end of September 2018, an amount of GH¢2.3 billion was collected and lodged into the established, and other, ESLA accounts.

Energy Sector Bonds Mr. Speaker, from January to August 2018, a re-tap on the 10- year ESLA bonds was effected with GH¢615.0 million and GH¢264.0 million respectively, bringing the total value of ESLA bonds issued to GHC5.8 billion. Energy-sector SOE debts, amounting to approximately GH¢5.6 billion have been settled to date from the proceeds.

Petroleum Risk Management

The 2018 Budget announced the development of a petroleum risk management programme to mitigate the economic impacts of global crude price volatility. In the last year, a strong recovery in global crude prices has brought to bear the full brunt of Government’s 2015 price deregulation policy. The Ministry of Finance, Ministry of Energy, and the NPA have worked closely over the past months to develop a strategy to reduce volatility in pump prices by limiting consumers’ expenditure against upward price movements.

Ken Ofori-Atta also made known government’s efforts to rake in more from its mineral resources.

Partial Securitisation of Mineral Royalties

The 2018 Budget announced Government policy of securitising future mineral royalties to support current developmental needs. In September, Parliament passed the Minerals Income Investment Fund Bill into law. The objective is to hold and manage the equity interests of Government in mining companies and receive mineral royalties and rents due Government. Accordingly, the Fund will set up a SPV to raise funds by way of an Initial Public Offering (“IPO”) through a dual listing on the Ghana and London Stock Exchanges. Government expects to raise up to US$750.0 million from the IPO. The transaction advisors for the IPO have begun work in earnest.

Petroleum Revenue for 2019

Mr. Speaker, the Benchmark crude oil price for 2019 has been projected at US$66.76 per barrel in line with the Petroleum Revenue Management Act (Amendment), 2015 (PRMA, Act 893). The gas price for 2019 is also projected at US$3.99 per MMBtu. The 2019 Benchmark Revenue crude oil output is 63.4 million barrels (173,764 barrels of oil per day).

Mr. Speaker, the Ministry is proposing to this august House to allow it to exclude gas revenues to the tune of US$181.80 million from the projected petroleum revenues for 2019, as we devise ways of getting VRA to pay for the gas supplied it by Ghana Gas. Furthermore, as a measure to minimise the amount of gas produced in the SGN Field for power production, Government has decided to postpone the extraction of its share of the gas resource (Royalties, and Carried and Participating Interest (CAPI), until such a time that we line up off takers to consume the gas in-year. These are prudential measures and should not be misconstrued to mean that the Ministry will not be pursuing the VRA’s gas bills, as required by the PRMA.

Mr. Speaker, if this House grants us this request, the projected petroleum revenue for 2019 will amount to US$1.1 billion. This is made up of Royalties (US$227.10 million), Carried and Participating Interest (US$602.80 million), Corporate Income Tax (US$249.60 million) and Surface Rentals (US$1.10 million).

Of this amount, US$404.90 million will be ceded to the NOC for its Equity Financing Cost (US$320.10 million) and share of the Net Carried and Participating Interest (US$84.80 million), US$473.0 million allocated to the Annual Budget Funding Amount (ABFA), while the GPFs receive US$202.70 million. The GPFs’ receipts will be distributed between the Ghana Stabilisation Fund (US$141.90 million) and the Ghana Heritage Fund (US$60.80 million) Strategic Pillars of the 2019 Budget

Mr. Speaker, consistent with H.E. the President’s vision of transforming the Ghanaian economy, creating prosperity and job opportunities for all, and moving us to a Ghana Beyond Aid, in 2017 and 2018 we launched a number of flagship programsthat have yielded significant results. In 2019, Government will consolidate and build on these programs. Mr. Speaker rather than the traditional presentation of Sectoral Performance and Outlook , the rest of my presentation is organised so as to highlight the key pillars of our 2019 budget, which takes bold and fundamental steps towards the President’s vision.

Mr. Speaker, The Budget Statement and Economic Policy for the 2019 Financial Year provides a detailed account of sectoral performance in 2018 and outlook for 2019. Here, I focus on 6 strategic pillars that build on the flagship programmes and ourb achievements over the past two years. Mr. Speaker, the strategic pillars of the 2019 budget are:

  • Infrastructure;
  • Agricultural Modernisation;
  • Industrialisation;
  • Entrepreneurship;
  • Improving Efficiency in Revenue Mobilisation and Protecting the Public Purse.
  • Social Intervention