Public Interest Accountability Committee
Return on investment of Ghana heritage fund declines
News Date : 17th February 2017

Return on investment of Ghana’s Heritage Fund recorded a decline in the second half of 2016 as compared to the first half of the same year.

A report released by the Bank of Ghana on the performance and activities of the Petroleum Holding Fund (PHF) and the Ghana Petroleum Funds (GPFs) for the Second half of 2016 -ended December 30, 2016 revealed that return on investment of the fund declined to – 2.99 percent for that period.

In the first half of the same year (January to June) however return on investment was 4.93 percent.

The decline in return has been attributed to global developments.

Despite the decline the fund performed better in 2016 than in 2015.

In 2015 return of interest on the fund yielded – 0.54 percent in the first half and 0.74 percent in the second quarter of that year.

Performance to pick up?

Despite the plunge the Bank of Ghana says it is confident yields on the investment funds will be positive in 2017.

The bank believes though past global trends had an impact on the fund’s investment performance, key current and future global developments will impact positively on the portfolios of the heritage fund and other funds.

”Additional appreciation of the foreign exchange value of the US Dollar and financial vulnerabilities in some advanced and emerging market economies could impact negatively on global growth resulting in bond yields falling.

De-globalisation stemming from trade protectionist policies (under-currents exposed by Brexit and Trump’s America first agenda) will exacerbate anaemic global trade and slow down growth considerably. The terms of Britain’s exit from the European Union have not been concluded.

Upcoming elections in Germany, France, Italy and other European Union countries have potential for adverse economic consequences resulting in investors moving their funds from high-risk assets to investment safe havens.

This will cause safe haven bond yields to fall, which will impact positively on the portfolios of the GSF and GHF”.

Fund Allocation

The heritage fund receives eight percent of revenue accrued from Ghana’s crude oil proceeds.

In the second half of 2016 the Ghana Heritage Fund received US$6.85million, while the Ghana Stabilization Fund received US$15.99 million.

While in the first half of that same year the Ghana Heritage Fund received US$5.79 million and the Stabilization fund received an amount of US$13.52 million.

The Heritage fund which was established in 2011, as at December, 2016 had accrued US$262.57 million making up 8 percent of total revenue from oil proceeds distributed to the Petroleum Holding Fund (PHF) and the Ghana Petroleum Funds (GPFs).

The Annual Budget Funding Amount (ABFA) received a total of US$1,473.45 million representing 43 percent of the total revenue while Ghana National Petroleum Corporation (GNPC) received a total amount of US$1,057.30 million equivalent to 31 percent of total revenue.

The Ghana Stabilization Fund (GSF) received an amount of US$633.87 million (18 percent).

Heritage fund to be used to fund free SHS?

The Heritage Fund has been in the news this week after  the New Patriotic Party (NPP) government hinted of reviewing the Petroleum Management Act to allow for the use of the Heritage Fund to finance its ambitious Free Senior High School (SHS) policy.

The Senior Minister, Yaw Osafo-Maafo, at a forum in Accra on Tuesday said the Heritage Fund, will be used to sustain the program. The fund was set up to support the country’s future generations when the oil reserves are depleted.

Meanwhile the Deputy Minority Leader, James Klutse Avedzi believes using the Heritage Fund component in the Petroleum Management Act to fund some policies, only six years after it was set up, could compromise the fund.

Source : Vivian Kai Lokko/