COVID-19: Economists divided over use of Heritage Fund
The intention of government to tap into the Heritage Fund as one of the measures to raise money to mitigate the negative impact of the coronavirus pandemic on the economy has been met with divided opinions among some economists in the country, with some in support of it and others against it.
Finance Minister, Ken Ofori-Atta, said in his statement in parliament to brief the nation on the impact of the coronavirus on the country’s economy that, government will submit a proposal to parliament to amend the Petroleum Revenue Management Act (PRMA) to “allow a withdrawal from the Ghana Heritage Fund to undertake emergency expenditures in periods of national emergency.”
Commenting on this, Director for the Institute of Social, Statistical and Economic Research (ISSER) at the University of Ghana, Prof. Peter Quartey, said he supports the proposal as the coronavirus pandemic has put the country in an emergency situation which requires desperate measures to be taken. In his opinion, once there is an option to use the country’s own resources, it is better than borrowing – which comes at a cost.
“If there is clear urgent need for us to tap into the Heritage Fund, then we should. The question is: is there need for it? My answer is yes. We are in an emergency situation. Just as the President said, we can bring the economy back to life but we cannot bring back lives. So we shouldn’t sit down for people to die. As for the economy, even if it should go to recession, we can bring it back.
My argument is, wherever there is money, that, in times of emergency you can reach out to, you should go for it and use it. You weigh your options. Anywhere you can get money at a least cost is where you should go,” he said in an interview with the B&FT.
But, his colleague professor, Dean of the School of Business at the University of Cape Coast, Prof. John Gatsi, has a contrary opinion. For him, the country’s Stabilisation Fund was created to deal with such emergency situations and once the Finance Minister has tapped into that Fund, it is not necessary to go into the Heritage Fund which is reserved for the future generation.
“The Finance Minister has put in place a very fine strategy. He is saying that he will cap the stabilization Fund to US$100 million. What it means is that, any money in excess of the US$100 million will be used to finance the coronavirus alleviation programme.
And as of the end of 2019, the Stabilization Fund had accumulated US$388.6 million. So with the new proposal, it means, automatically, US$288.6 million is available to finance the Coronavirus Alleviation Program.
And even with the remaining US$100 million in the Stabilisation Fund, he can apply the law to take 70 percent of it to take care of the budget shortfall. So, what it means is that, the total possible amount that the government can get from the Stabilization fund without adding 2020 first quarter petroleum revenue is more than GH¢2 billion.
Therefore, to make the argument that we are in an emergency and so we need to tap into the Heritage Fund to take care of the coronavirus, in my opinion, is not right. The object of the Stabilisation Fund is to deal with emergencies like this; and we have money to do so from the Fund,” he told the B&FT in an interview.
He added that the present circumstance does not qualify as emergency enough to dip hands into the Heritage Fund.
“The object of the Heritage Fund is that it is to serve as endowment for future generations of citizens who will be alive at the time when all petroleum activities come to an end. Parliament can also pass a resolution of majority of parliamentarians only after 15 years from 2011 (which can only happen in 2026) to withdraw a portion of the accumulated interest and not the principal. It is therefore clear that the object and timing of the Heritage Fund does not allow for any utilisation under the present circumstances,” he maintained.