Commenting on this, Professor of finance at the University of Cape Coast, Prof. John Gatsi, said the position of the IMF is right, as the Petroleum Revenue Management Act (PRMA) does not allow oil revenue to be made readily available for use if there is an urgent need for forex.
“The reason why capturing oil funds as part of international reserves for the purposes of demonstrating that your international reserves are capable of covering your imports over a period of time – an average of 3-months – is not acceptable for the IMF is that such money won’t be available for government if there is need to use the reserves to cater for immediate use.
“If you take the Petroleum Management Act, it states that the Stabilisation Fund and Heritage Fund are such that they cannot be used unless certain conditions exist. For example, the only condition under which we can use the Heritage Fund is 15 years after the coming into force of the Petroleum Revenue Management Act. And this Act came into force in 2011, which means we can only touch the funds in 2026.
“But even in that 2026, the part of the Heritage Fund we can use is the accrued interest on the Fund and not the actual fund itself. And even with that, there is a condition which states a two-thirds majority resolution in parliament must agree to the use of that money. So, what it actually means is that money is not readily available until after 2026. So even if you add it as part of your reserve, assuming there is a turbulence today and you want to shore-up the currency, you cannot quickly make that money available for use,” he said in an interview with the B&FT.
If you come to the Stabilisation Fund, it is such that it can be used during times of economic turbulence emanating from weak oil production and weak prices which was not anticipated in the budget. So, two things must occur: it should be very clear that crude oil prices have gone down significantly, and the revenue you are going to get is so low it will affect execution of the budget.
“To use that money, you must meet the withdrawal criteria. So, it is clear that money is not readily available should something happen and you want to trigger use of the Stabilisation Fund.”
Source: B&FT