Fiscal policy think tank, Institute of Fiscal Studies (IFS) took government of Ghana to the cleaners here on Tuesday over a projected 2.7 billion Ghana cedis or 750 million dollar loss in the 2015 annual budget.
IFS said the loss could have been avoided if government had taken pragmatic steps to hedge petroleum pricing before the fall in global crude prices.
Last month Finance Minister, Seth Terkper told parliament that Ghana stood to lose about 2.7 billion cedis or 750 million dollars in its projected petroleum revenue in the 2015 budget.
He also announced measures being adopted by government to insulate the budget against any possible over-runs in the face of the global crude price slump.
?What is baffling many Ghanaians is why the government has been so reluctant to resume the hedging program which was deemed to be very successful in the past,? Prof. Newman Kusi, Executive Director of IFS told the media.
He said the successes of past hedging decisions stemmed from the fact that the country has a team of people with the technical capacity and understanding of how the hedging process works.
In addition, Prof. Kusi said the country also has counterparty banks available and willing to underwrite the hedging arrangement since the hedging program has been tested in the country and has proved successful and beneficial.
Prof. Kusi was an Advisor to Kwabena Duffuor (Ph D) immediate past Minister for Finance, who is also the President of the IFS.
The economist also took issues with parliament for their inability to ask the Finance Minister when he appeared before it the reason why the government did not hedge against the falling crude oil prices, leading the country to lose a whopping 2.7 billion and causing important expenditures to be cut.
He intimated that the Minister of Finance is very much aware of the benefits of commodity price and interest rates risk management;?In fact to mitigate the risks of rising interest rates during the early part of 2013, the Minister submitted to Cabinet an interest rate risk management proposal and received approval on 2nd April 2013,?
?The Minister of Finance thus knows that he is expected to manage the country?s economic risks, but not to add to them through inaction. The inaction of the Minister has dangerously exposed the country to avoidable risks. The drop of 2.7 billion cedis (750 million dollars) in this year?s expected oil revenue is a financial loss that clearly could have been avoided,? he maintained.
Speaking at the same forum, Evron Hughes Chief Executive Officer of Cambridge Capital, a local investment group criticised the government?s alleged lack of commitment to fiscal discipline.
He said it is the lack of commitment to fiscal discipline on the party of government that makes it not to open up to citizens.
Reacting, the minister for Finance, Seth Terkper wondered what would have happened, should the government hedge crude oil import at about 75 dollars per barrel (the most plausible when the global price was about 105 dollars per barrel) before the slump in the prices on the global stage.
? We would not have been in the position to take advantage of the current lower prices of about 50 dollars per barrel,? Terkper argued.
He said however that the government had not abandoned the hedging policy, since it had ceded the authority to hedge to the National Petroleum Authority (NPA) regulator of the downstream, and would hedge even the exports when the conditions demand it. Enditem.
Source: Xinhua
