Dr Ishmael Ackah
The Africa Centre for Energy Policy (ACEP) has predicted that government will borrow more funds this year owing to the revenue short fall in the country’s oil sector.
ACEP’s forecast is based on a recent report by the Public Interest & Accountability Committee (PIAC) which revealed that some nine oil companies had failed to pay surface rental costs totaling $721,000 to government in 2015.
Currently, there are about 30 oil companies who are on record to have registered but 14 of these are absent from site.
Also, the Ghana Revenue Authority (GRA) stated that it could not trace the whereabouts of owners of the defaulting companies which suggested that their invoice amounts were likely to be written off.
The non-payment of the surface rental costs translated into a 61 percent drop in revenue expected from the sector.
Surface rentals and corporate tax form part of revenue expected by government for its operations every year.
Dr Ackah stated that “in such a situation, government would be put under pressure to go and borrow which wouldn’t have been the case if it were dealing with credible companies.”
Assessment
Licensed upstream companies paid $465,920 in 2015 compared to about $907,501 in 2014, representing 49 percent drop, according to the Ghana Revenue Authority (GRA) and Bank of Ghana 2016 report.
Dr. Ishmael Ackah, Head of Policy at ACEP, indicated that the development would grossly affect government’s revenue.
According to him, the oil companies had been granted provisional licences even though they were yet to find money to start oil exploration.
GRA, meanwhile, has been urged to, as a matter of urgency, begin the recovery of all outstanding surface rentals owed by the upstream companies to the government with applicable penalties.
Advice
Dr. Ackah called for a competitive bidding process to attract competent companies.
He disclosed that if government continued to negotiate with companies under the current structure, similar situations would arise in the years ahead.
Meanwhile, the Centre for Economic and Business Research (CEBRE), has suggested that licences of defaulting companies should be revoked.
This is because Oranto/Stone Energy, for instance, has not honoured its surface rentals of $67,438.36 since February 21, 2013.
Debt stock
Ghana’s total public debt stock reached GH?105.1 billion at the end of May 2016, representing 66.4 percent of Gross Domestic Product (GDP) as against GH?104.5 billion at the end of April 2016, representing 66.3 percent of GDP.
Out of the total debt stock, debt incurred internally was GH?43.2 billion, representing 27.3 percent of GDP, while the external debt stock stood at GH?61.9 billion, representing 39.1 percent of GDP.
In January, the debt was GH¢101.1 billion and increased to GH?102.3 billion in February. In March, the debt rose to GH?103.1 billion.
Ghana last week planned to raise $1 billion Eurobond but abandoned the plans because of high interest demanded by international investors.
The Finance Ministry said in a statement on Thursday after concluding investor meetings in the U.K. and U.S. that government will monitor markets and revive the sale “at the optimal time and the right conditions.”
It also capped a buyback tender for $500 million of 2017 notes at $100 million.
By Samuel Boadi