In the first nine months of this year, the government spent more than half of petroleum proceeds earmarked for budget support on the Free Senior High School (SHS) programme, leaving the remainder for three other priority sectors to share.
The prioritisation of the programme under the education sector has resulted in reduced allocations to the other sectors, according to the 2019 annual petroleum report submitted to Parliament last month.
It showed that of the GH¢987.94 million utilised under the Annual Budget Funding Amount (ABFA) for the first nine months of the year, GH¢570 million, representing 57.9 per cent, was spent on the Physical Infrastructure and Service Delivery in Education.
The report indicated that GH¢359.17 million went into the payment of first term fees for the 2018/19 academic year while GH¢211.70 million catered for the payment of fees for the second term.
“Total spending on Physical Infrastructure and Service Delivery in Education amounted to GH¢570.87 million. The amount accounts for 57.9 per cent of total ABFA utilised for the period.
The entire amount was used to support the implementation of Government’s flagship Free Senior High School Policy,” the report noted.
The remaining 42.1 per cent of the total spending of GH¢987.94 million was shared among the three remaining priority areas.
The education priority area was followed by the priority area of roads, rail and other critical infrastructure which received GHC300.25 million, representing about 30 per cent of total ABFA expenditure. The agricultural and health priority areas received the least amounts of GH¢70.2 million and GH¢43.6 million respectively from the ABFA within the same period.
The government’s attempt to heavily rely on petroleum revenues to fund its flagship Free Senior High School (SHS) Policy has been described as an unsustainable move.
An Energy Sector Policy Analyst, Dr Steve Manteaw, said the country was treading on a risky path considering the volatile nature of petroleum revenues, explaining that any shortfall in revenues as a result of price changes could affect the successful implementation of the policy.
Citing oil price collapse in 2014, he said prices collapsed from as high as over US$110 per barrel to as low as US$30 per barrel in 2015, which led to a revenue loss of about US$600 million.
“Assuming we had Free SHS at the time, it would have compromised the country's ability to keep the children in school. In terms of its sustainability, Ghana can be said to be treading on a risky path, on account of the volatile nature of petroleum revenues,” he said in an interview on December 12.
He said it was very clear that it was dangerous to heavily depend on oil revenues to finance the Free SHS, hence it was important to look for complementary sources and harmonise the revenues to ensure the implementation was successful.
“My suggestion will be to look for complementary sources such as Corporate Social Responsibility (CSR) support, COCOBOD and mineral revenue. The Ghana Education Trust Fund (GETFund) resources ought to be harmonised with these revenue sources, including a reduced ABFA to create a common pool of funds to support the programme,” he said.
He pointed out that the over reliance on petroleum revenues for the financing of the Free SHS programme had made it difficult for Government to keep faith with Section 21(4) of the Petroleum Revenue Management Acto (PRMA) which requires that a minimum of 70 per cent of the ABFA is spent on capital expenditure.
The government, he said, recognised this problem and earlier this year appealed to the committee to permit the redefinition of Capital Expenditure to include human capital, and for that matter the Free SHS.
ABFA allocations for 2020
An analysis of the 2020 budget statement of government, which was carried out by the Africa Centre for Energy Policy (ACEP) said the government intended to spend GHS4.33 billion of petroleum revenue in 2020, of which 70 per cent was planned to be spent on capital expenditure and 30 per cent on goods and services.
This amount is almost equal to the projected ABFA revenue of US$761.3 million. According to the report, the ABFA was allocated to 15 Ministries, Departments and Agencies (MDAs) including the Office of Government Machinery.
“About 99.8 per cent of the allocation to goods and services is planned to finance the free SHS programme while the remainder will finance the activities of the Public Interest and Accountability Committee (PIAC),” he said.