Oil Price Drop: ABFA Funds Must Be Allocated Efficiently

As the tumble in world oil price affects Ghana's projected revenue for the year 2015, there have been growing concerns on how the allocation of the Annual Budget Funding Amount (ABFA) on priority areas may shape out.

The ABFA is a predetermined percentage of the Benchmark Revenue but the actual allocation is determined by the Minister of Finance and approved by Parliament.

Currently, the ABFA covers four key priority areas namely, Roads and other infrastructure, agriculture modernization, expenditure and amortization of loans for oil and gas infrastructure, and capacity building including oil and gas.

But the drop of world oil price from $110 in March last year to as low as $54 as of March 19 2015, means that, the ABFA funding may suffer as Ghana government had to reduce its oil revenue projection by as high as 64.46 per cent, equivalent to GH'2.7 billion.

It also means that reduction in revenue forecasts from oil exports from an initial estimate of GH'4.2 billion to GH'1.5 billion. Seth Terkper Finance Minister has already dropped the hint that there won't be sufficient funding to cover the ABFA for 2015.

In his supplementary budget for 2015, Terkper stated that of the projected total petroleum receipts, GH'468.9 million will be transferred to the National Oil Company in line with the PRMA, but the remaining amount of GH'1.0 billion will not be sufficient to cover the ABFA of GH'2.5 billion in the 2015 Budget.

Even though the GH'1.0 billion remaining amount may not be enough to carry out projects under the ABFA for 2015, oil and gas experts, urges that the ABFA must be allocated efficiently for impact.

They say currently the allocation on these priority areas are most invariably spread thinly across several projects and this does not augur well for optimal impacts in the selected sectors.

In the area of roads for instance, they argued that it's not acceptable for the ABFA to cover 149 roads in 2013 alone, 86 in 2012 and 55 in 2011.

The Public Interest and Accountability Committee (PIAC) have already expressed similar sentiments over the ABFA allocations.

Speaking in an interview with The Enquirer, Professor Kwaku Appiah-Adu, an Oil and Gas expert, said it may be beneficial for the minister to focus on fewer key major projects under a sector and rather pump in the available funds, which originally meant for other projects on the selected projects for maximum impact and efficiency.

Projects Under the priority areas, he lamented are wide and scattered and therefore does not augur well for effective tracking and monitoring of such projects and hence provide room for shoddy works.

He argued 'we can take few important projects under roads for instance and focus all attention on it to achieve impact and satisfaction, and then the following year tackle other projects for same'.

Prof. Appiah-Adu said currently, the allocations are scattered and sometimes on not too important areas.

He also urged for the tightening of loopholes, ensuring of strong monitoring and evaluation systems and build on good institutions towards a successful utilization of the oil revenue.

He lamented that there is enough prove that some projects that benefits from the ABFA allocations, sometimes are not completed on time and some too falls short of standards.

There is no doubt Ghana needs huge investments to push its developmental agenda forward, but he pointed the ABFA must be focus driven, whiles other areas are tackled with other sources of revenue.

'We must utilize our oil revenue on the right direction so that when we are done we can see concrete results', he said.

In the face of the drop of world oil price, another Oil and Gas expert, Mr. Kwame Jantuah said there was the need for the Finance Minister to calculate the ABFA funds again to ensure precise allocation to the selected priority areas.

On his views on the best way to spread the ABFA funds, he said even though the allocations on the four priorities are thinly spread, he was of the view that they must be streamlined for maximum impact.

He suggested that the allocation to roads can be substituted to railway development to reduce the pressure on the roads.

He argued that other sources of funding can be used to construct the roads, which invariably are been destroyed by the heavy trucks.

Below is a Pie Chart distribution of ABFA priority Areas from 2011-2013