During the first half of 2016, an amount of US$126.41 million was received into the Petroleum Holding Fund (PHF) established by the Petroleum Revenue Management Act, 2011 (Act 815) (PRMA), the central bank has reported.
This comprised US$114.40 million being proceeds of the 30th, 31st and 32nd liftings undertaken by the Ghana Group, and US$12.00 million from gas sale, taxes, royalties, surface rentals and interest earned on undistributed lifting proceeds held in the PHF, according to the Bank of Ghana’s reports on the performance of the PHF.
The report said total amount distributed from the PHF in H1 was US$87.15 million, including other income of US$20.92 million (US$9.21 million was received in H2 2015).
Total amount received by Annual Budget Funding Amount (ABFA) for H1 was US$45.07 million compared to US$92.03 million for H2 2015. The Ghana National Petroleum Corporation (GNPC) received an amount of US$22.77 million for CAPI and EFC in H1 2016 compared to US$60.52 million in H2 2015.
The Ghana Stabilisation Fund (GSF) and the Ghana Heritage Fund (GHF) received US$$13.52 million and US$$5.79 million, respectively in H1 2016 while an amount of US$15.17 million and US$6.05 million were received, respectively in H2 2015.
ABFA received a total of US$1,420.14 million representing 43 per cent of the total revenue while GNPC received a total amount of US$991.58 million equivalent to 30 per cent of total revenue. GSF and GHF had each received an amount of US$617.88 million (19 per cent) and US$255.72 million (8 per cent), respectively. Total lifting proceeds and other income distributed to ABFA, GNPC, GSF and GHF from inception to the end of June 2016 amounted to US$3,285.31 million, according to the Bank of Ghana report.
Withdrawal from GSF
The central bank said there were no withdrawals from the GSF during H1 2016 under Sections 12 and 23 of the PRMA, 2011, (Act 815). The cap of US$200 million set for the GSF in the 2016 Budget was not attained in H1.
Details of other receipts
Other petroleum receipts comprising surface rental, corporate taxes, price differential, interest earned on undistributed funds and proceeds of gas sale paid by GNGC received in H1 2016 amounted to US$12.01 million. Of this amount, corporate tax totalled US$2.29 million and interest on undistributed funds was US$0.04 million, surface rental of US$0.38 million and gas sale proceeds amounted to US$9.30. The report said a total amount of US$ 0.30 million received in H1 will be distributed with the proceeds of the 32nd lifting in H2.
In H1 2016, the sluggish business investment, slowdown in corporate profits, heightened uncertainty regarding the future course of domestic regulatory and fiscal policies portended a broader economic slowdown in the US economy. Based on its assessment of realised and expected progress towards its objectives of 2% inflation and maximum employment, as well as the downside risks to the outlook, the FOMC maintained the federal funds target range at 0.25% to 0.50%.
The report said several FOMC members were of the view that the headwinds restraining growth and holding down the neutral rate of interest were likely to subside only slowly, hence a gradual approach to raising rates was prudent. Inflation continued to run below the FOMC’s longer run objective of 2% held down by large declines in energy prices and prices of non-energy imported goods.
The CPI (yoy) index rose to 1.0% in June 2016 up from 0.70% in December 2015 while the core PCE (yoy) Index rose marginally from 1.40% in December 2015 to 1.60% in May 2016. The risks to the projection for inflation are tilted to the downside, reflecting the possibility that longer term inflation expectations may have edged down, the report added.
It said global disinflationary risks and slow growth pose downside risks to US inflation and growth. The pace of labour market improvement towards the FOMC’s objective of maximum employment slowed, although unemployment rate fell from 5.0% in December 2015 to 4.9% in June 2016.
The fall in the unemployment rate was due to the marginal increase in the US labour force participation rate from 62.6% in December 2015 to 62.7% in June 2016. Change in Non-farm payrolls fell unexpectedly to 11,000 in May but rose to 287,000 in June.
The rate of change in average hourly earnings (yoy) fell from 2.6% in December 2015 to 2.4% in June 2016. The risks to the unemployment rate were tilted to the upside due to weak aggregate demand. Activity in the housing sector was moderately mixed. The NAHB Housing Market Index rose to 61 in January 2016 from 60 in December 2015 but was flat at 58 in February through May 2016, and rose to 60 in June. Housing-starts, new home sales, and building permits improved. The US international trade deficit narrowed marginally from US$41.5 billion in December 2015 to US$41.1 billion in May 2016.
The report said exports (yoy) decreased by 4.2% in May as against a decline of 7.3% in December 2015 due to lower commodity prices and reduced shipments of capital and consumer goods. Imports decreased 3.1% in May compared to a decline of 6.9% in December 2015 due to the strong exchange rate of the US Dollar. In H1 2016, the US Treasury yield curve bull flattened as the FOMC adopted a gradual approach to monetary policy normalisation. The decision of the United Kingdom to leave the European Union, flight to quality stemming from global growth concerns and negative yields offered by ECB and BoJ also offered relative value in US Treasuries. The 10-year yield ended H1 2016 at 1.47% as compared to 2.27% end H2 2015, while the 2-year yield ended H1 2016 at 0.58% as compared to 1.05% at the end of H2 2015.
In Europe, the ECB took several decisions in pursuit of its price stability objective. As regards the key ECB interest rates, the rate on the deposit facility was lowered by 10 basis points to -0.40%; the rate on the main refinancing operations was decreased by 5 basis points to 0.00% and the rate on the marginal lending facility was also lowered by 5 basis points to 0.25%.
On non-standard monetary policy measures, the monthly purchases under the asset purchase programme (APP) were expanded to €80 billion per month. Investment grade euro-denominated bonds issued by non-bank corporations in the euro area are to be included in the assets eligible for purchases under a new corporate sector purchase programme (CSPP). It is expected that this package will exploit the synergies between different instruments and further ease financing conditions in order to reinforce the momentum of the Euro area’s economic recovery and accelerate the return of inflation to levels below, but close to 2% over the medium term.
The performance of the Ghana Petroleum Funds’ portfolios improved in H1 2016 relative to H2 2015. Return on investment of Ghana Heritage Fund (GHF) for H1 was 4.93% compared to 0.74% in H2 2015. Ghana Stabilisation Fund (GSF) returned 0.33% in H1 compared to -0.01 per cent in H2 2015. At the end of H1 2016, net return on investment of the Ghana Petroleum Funds since inception was US$16.21 million compared to $13.14 million in H2 2015.
Petroleum holding fund
Petroleum Holding Fund Account (PHF) at the end of H1, held a balance of US$48.673 million which comprised undistributed petroleum receipts amounting to US$48.473 million and a mandatory balance of US$200,000.00.
In H1 2016, a total amount of US$87.15 million made up of lifting proceeds of the Ghana Group, surface rentals, and PHF income was distributed. GNPC received US$22.77 million; ABFA received US$45.07million while GSF and GHF received an allocation of US$13.52 million and US$5.79 million, respectively, during the period under review. GHF and GSF returned 4.93 percent and 0.33 per cent, respectively.
Outlook first half 2016
The headwinds to global growth in 2015 remain the same in 2016 and have intensified somewhat with the IMF revising global growth downward, to 3.2% from 3.4%. These include the slowdown and rebalancing in China, decline in commodity prices – with redistributive consequences across sectors and countries, related slowdown in investment and trade, and the effects of the United Kingdom’s decision to leave the European Union on the financial markets.
“As signaled in our Q4 report, due to the persistence of these headwinds, the FOMC has decided to approach interest rate increases cautiously. With this dovish stance US monetary policy remains accommodative in line with the policies of the ECB, BOJ, and BOE. It is expected that the synergies of these policies will reinforce the momentum of global economic recovery. Consequently bond yields may be expected to remain subdued in a low interest rate environment, and the market valuations of the Ghana Petroleum Funds may rise.”