ESTABLISH FUND FOR OIL REVENUE — QUARTEY (PAGE 33, NOV 4)

A SENIOR Research Fellow of the Institute of Statistical, Social and Economic Research (ISSER), Dr Peter Quartey, has called for the establishment of an Oil and Gas Fund into which oil revenue for judicious use can be deposited.
He said the fund, apart from assisting to protect the country’s exchange rate, monetary management and capital inflows, could also ensure transparency by eliminating corruption in the utilisation of oil revenues and preventing the problems of other African oil-producing countries.
Dr Quartey made the call when he presented a paper on ‘’Oil and Ghana’s Development; Monetary, Exchange Rate Management with Capital Flows’’ as part of a series of lectures on the oil industry. The lecture was organised by ISSER with support from Merchant Bank and Friedrich Ebert Foundation.
He said although the announcement of the oil discovery had been greeted with joy, a significant number of Ghanaians were sceptical because the country could be plunged into a revenue curse syndrome.
That, he said, was because countries with abundant natural resources had worse growth performance than those that were less reliant on natural resources.
Dr Quartey said a major issue resulting from the oil find was what would be the effects of the oil income on monetary management such as inflation, exchange rate and capital inflows.
He noted that the oil discovery would undoubtedly affect monetary management, the agricultural and other sectors because these areas would become less profitable since the appreciation of the Ghanaian currency would make agricultural products such as cocoa, pineapple and other exports non-competitive.
He said this was the result of capital inflows which would bring substantial benefits such as higher levels of investment, facilitate technology transfer, enhanced management skills as well as enlarge market access.
He said, however, that these substantial capital inflows would necessitate higher inflation, real appreciation of the currency, lower domestic savings and reduce domestic interest rate.
Dr Quartey said it was because of these factors that an Oil and Gas Fund was necessary since it would check spending as well as encourage savings so that the Government would not be affected unduly by the swings in the price of crude oil.
Ghana discovered oil in June 2007, and the Ghana National Petroleum Company (GNPC) is anticipating that the country could produce about 120,000 barrels a day and between 800 million to three billion barrels annually.
Ghana's current oil consumption is between 40,000 and 60,000 barrels a day.
Analysing the oil production level, Dr Quartey said if prices were pegged at $60 a barrel, Ghana could earn about $1.872 billion annually, stressing the need for such a fund to regulate expenditure.
"Spending cannot be avoided but revenue in the fund should be utilised in a prudent manner on agriculture and manufacturing to improve the economy".
Mr Danaa Nantogmah, Programmes Co-ordinator of Friedrich Ebert Foundation, called for a national development strategy on the Ghanaian economy to facilitate the efficient and effective management of the oil and gas revenue.
He called on government to pay special attention to the need of a home grown national development strategy as a prerequisite for sustainable development.