A Former Governor of the Bank of Ghana(BoG) Dr. Kwabena Duffour has criticized the erstwhile John Mahama government for investing the proceeds from the Heritage Fund into short term instruments.
According to him, such a move defeats the purpose for setting up the fund since it is meant for future consumption.
The Heritage Fund which is aimed at saving part of the revenue accrued from the Petroleum fund for future consumption was invested in a short term security by the previous government.
According to a semi-annual report released by the Bank of Ghana in June 2016, the Heritage Fund contained about US$267,811,613.66 million while the Stabilization Fund had US$191,351,726.56 million.
Speaking at Pre- Budget Forum organized by the Institute for Fiscal Studies(IFS), Dr. Duffuor who is also a Former Finance Minister stated that the investment is misplaced, hence not financially prudent.
“The Heritage Funds are for generations yet unborn, should it have this aim, short term instrument?, the bankers here[at the forum], is that the best way to manage funds for posterity,” he quizzed.
He argued that the proceeds from the Stabilization Fund could be invested in short term security since it is targeted at helping stabilize the economy.
“We have the Stabilization Fund. If we have to keep that in short term instrument and earn lower rate of return, I will understand. But for the generational fund, they should be invested in long term investment because it’s not for you or for me,” he stressed.
Pointing out the financial benefit of investing the funds in a long term instrument, Dr. Duffuor maintained that such investments will have an improved yield curve that will benefit the generation yet unborn.
“We are not going to use the funds now, are we?, so why are we keeping them in short term instruments. We are wasting the funds and for the stabilization fund, personally I have no problem if you keep them in a short term instrument but for the Heritage Fund I have a problem seeing that they are all in short term instrument,”.
Dr. Duffuor advocated for a new policy direction to correct such decisions since they do not inure to the benefit of the country.