Two think-tanks, Institute for Fiscal Studies (IFS) and IMANI-Ghana have accused Finance Minister Seth Terkper of causing financial loss of Ghc2.7 billion (equivalent to 1.7 per cent of GDP) to the state by his failure to hedge oil prices on the international market.
The Government earlier estimated to rake in Ghc4.2 billion from the oil sector this year, but the sharp fall in crude prices means just Ghc1.5 billion would be raised in 2015.
This means “total revenue and grants for the 2015 fiscal year has now been revised to Ghc29.7 billion (equivalent to 22.3 per cent of GDP) instead of Ghc32.4 billion (equivalent to 24.0 per cent of GDP),” Executive Director of IFS Prof Newman Kusi said.
Crude oil prices have consistently fallen from as high as 155 dollars per barrel to below 50 dollars per barrel.
At a joint press conference Tuesday, Prof Kusi said considering the fact that Ghana “successfully” hedged the price of oil in the past while Mr Terkper was a deputy finance Minister, he should have known better than fail to do same now that he is the Minister.
Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a transfer of risk without buying insurance policies.
“The question that arises is why couldn’t the country avoid the loss of Ghc2.7 billion? Why did the Government stop using the hedging programme that was successfully implemented between 2010 and 2012 to mitigate the losses?” Prof Kusi wondered.
He said: “Ghana’s hedging programme was tremendously successful and, together with other prudent policy measures pursued by the Government, it brought about one of the longest periods of monetary and fiscal stability in the history of the country’s economic management.
“In the first two months of the hedging programme, marginal losses were made, but thereafter the programme recorded significant net surpluses, which rose to US$98.4 million (net of premium ocsts of $63.7 million in August 2011.”