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IFS calls for strong governance institutions

  • SOURCE: | qwesa2big
  • slide2The Chairman of the Governing Council of the Institute for Fiscal Studies (IFS), Mr Alex Ashiagbor, has called for strong, independent, and transparent governance institutions to help to effectively manage the country’s proceeds from its natural resources.

    He argued that for policies outlined to guide the risks associated with the management of natural resource revenues to be effective, the institutional framework must be what he described as ‘solid’.


    “In fact, a large share of literature on the natural resource curse points to institutional weakness, which includes corruption, non-adherence to the rule of law, weak governance and political interference and instability as the major causes of mismanagement of internal resources in developing countries,” he said.

    Speaking at a pre-budget forum organised by the Natural Resource Governance Institute (NRGI) and the IFS, to share perspectives on fiscal governance with respect to the management of petroleum revenues, he explained that establishing strong institutions prior to the exploration of the resource was considered one of the safest ways to avoid the resource curse.

    “A great African example is Botswana where it has been proven that relative healthy governance institutions allowed the country to properly manage the proceeds from the mining of diamonds,” he said.

    Mr Ashiagbor also added that local capacity must be built for state institutions and officials should be able to deliver their mandate effectively explaining that, “severe sanctions must be administered to extracting companies who flout the laws and incentives given to those who do the right thing.”

    Ghana began commercial exploration of oil from the Jubilee Fields in December 2010, and since then how the government could use revenues generated from oil to drive national development has dominated public discourse.

    Globally, the discovery and exploitation of natural resources have facilitated the process of economic growth and development, but in most developing countries, there is a high degree of dependence on mineral commodity exports for foreign exchange and fiscal revenues.

     Managing the fiscal framework

    He also reiterated the need for an effective but flexible fiscal framework to address problems associated with the management of natural resource revenues.

    This framework, he said, would help minimise the complexities in the financial management of natural resources, aid growth sustainability and create sustainable long term prosperity for people.

    “Fiscal discipline is an important prerequisite. Proper investment and production policies as well as appropriate regulatory framework must be designed to benefit the state and the investor. The regulatory framework must ensure equity in payment of taxes and royalties,” he said.

    He also added that natural resource proceeds, if not properly managed, had the tendency of causing macroeconomic instability characterised by volatility in government revenues, price and exchange rate fluctuations.

    “Issues relating to volatility are of a particular concern in the management of natural resource revenues because they influence both short and long run economic growth objectives. To minimise the complexities in financial management, growth sustainability and the creation of sustainable long term prosperity, there is the need for effective but flexible frameworks to address the problems associated with the management of natural resource revenues,” he said.

     2016 expectations

    The Africa Deputy Director of the NRGI, Mr Emmanuel Kuyole, said after discovery of oil there were high hopes that the petroleum sector would catapult the country onto the path of becoming an industrialised nation.

    “Unfortunately for Ghana, less than five years into oil production, high expectations have made way for harsh realities. As Ghana reaches five years of oil production, we are faced with some difficult choices: the 2016 budget requires painful adjustments to bring the government back to a sustainable position,” he stressed.

    The Africa Center for Energy Policy (ACEP) in its recommendation advised that spending of oil revenues should be based on an investment plan guided by a long-term national development or medium term development framework.

    “This will provide consistency in the use of petroleum revenues for projects that add value to the economy on a sustainable basis,” Head of Policy at ACEP, Dr Ishmael Ackah said.


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