In 2018, Ghana’s Petroleum Funds (GPF) returned a net realized investment income of US$ 15.75 million compared to US$ 9.30 million in 2017.
Ghana’s Petroleum Funds consist of the Ghana Stabilisation Fund (GSF) and the Ghana Heritage Fund (GHF). Both funds receive portions of the oil revenue each year.
In the latest, Bank of Ghana Petroleum Holding Fund and Ghana Petroleum Funds semi-annual report, July 1 – Dec 31, 2018, in the second half of 2018, the Ghana Petroleum Funds returned a net realised investment income of US$9.26 million compared to US$6.49 million in first half of 2018.
Section 9 (1) of the Petroleum Revenue Management Act (PRMA), 2011 (Act 815) established the GSF which is supposed to cushion the country when there is an unanticipated shortfall in petroleum revenue.
The Section 10 (1) of the PRMA establishes the GHF which is supposed to serve as an endowment for future generations and which cannot be touched unless after 15 years of its establishment.
The Ghana Stabilisation Fund (GSF) contributed in the second half of 2018, 42.65 percent or US$3.95 million to total net income compared to US$2.45 million in first half of 2018 while GHF contributed 57.35 percent or US$ 5.31 million compared to US$ 4.04 million in first half of 2018.
The GPFs reserves at the end of H2 2018 were US$866.38 million (GHF was US$485.17 million and GSF was US$381.20 million) compared to US$842.14 million in first half 2018 (GHF was US$413.48 million and GSF was US$428.66 million).
Performance of the Ghana Petroleum Funds
In second half of 2018 the difference between the US 10 year Treasury note yield and the 2 year note yield narrowed by 13.38 basis points (bps) from 32.79bps in June 2018 to 19.41bps at the end of December 2018. This follows a 19.21bps narrowing from 51.84bps in December 2017 to 32.79 bps at the end of June 2018.
This resulted in a flatter profile of the term structure of interest rates.
Among the reasons accounting for this were increases in the target range for the federal funds rate, lower longer term inflation expectations and lower term premiums. Consequently, the yield of the US 10-year Treasury note fell 17.41 basis points from 2.8601 percent in June 2018 to 2.686 percent in December 2018, while the yield of the 2-year note fell 3.63 basis points from 2.5282 percent in June 2018 to 2.4919 percent in December 2018.
The fall in yields impacted the mark to market performance of the Ghana Heritage Fund positively. Total return on investment of the Ghana Heritage Fund (GHF) year to date, (second half of 2018) was 1.12 percent. The three year annualised return of GHF was 1.92 percent whiles the five year annualised return was 2.69 percent.
Allocations Made So Far
Since the inception of the Ghana Petroleum Fund (GPF) has been allocated an amount of US$ 1.537 million, with a realized income of about US$ 44 million. Withdrawals made from the fund amount to US$ 714 .6 million.
Petroleum Holding Fund
The Petroleum Holding Fund Account (PHF) at the end of second half, 2018 held a balance of US$0.23 million which comprised interest on undistributed funds amounting to US$0.03 million, and a mandatory balance of US$0.20 million.