Oil revenue drop set to affect Free SHS funding

BY BENSON AFFUL

Policy analyst Gideon Ofosu- Peasah, at the Africa Centre for Energy and Environmental Sustainability (ACEES), says he foresees a drop in funding for the government’s Free Senior High School (SHS) programme for the 2020 fiscal year, as the Finance Minister readies to present the mid-year budget review this month. Of the Free SHS programme’s 2020 funding allocation of GH¢2.43bn, 53 percent was expected to come from petroleum revenues. However, the oil sector revenue has suffered a setback since the outbreak of the global pandemic. The 2020 budget was based on an oil-price assumption of US$62.6 per barrel, and total petroleum revenue was projected at US$1.6bn.

Finance Minister Ken Ofori-Atta told Parliament earlier this year that at an average crude oil price of US$30 per barrel this year, the government will register a shortfall in crude oil receipts amounting to GH¢5.7bn. Mr. Ofosu-Peasah, who is an economist and the deputy director of ACEES, said he expects a downward review of the benchmark oil price from US$62.6 to a price between US$45 and US$50. “I expect a downward review of the benchmark petroleum revenue of US$1.5bn, to be slashed down by a range between 24 percent and 28 percent due to the dip in crude oil prices on the international market and the effect it will have on the various petroleum income streams, excluding surface rentals,” he told Business24. He said all the projects earmarked for funding through the Annual Budget Funding Amount (ABFA) will witness reduced or delayed disbursement.

President Akufo-Addo, during the Free SHS policy launch in September 2017, said his government will invest revenues from oil into one of the most ambitious social programmes in the country’s history. According to him, Free SHS is ensuring that the country’s oil revenues are being equitably distributed to the people—and not ending up in the pockets of a few.

The first year of implementation of the policy saw the government earmark about GH¢400m to take care of over 300,000 students who were placed in Senior High Schools (SHS) across the country. With the full roll-out of the policy completed, total enrolment in SHS currently stands at 1.2m students, the highest ever in the country’s history. In 2019, out of the GH¢12.87bn allocated to the Ministry of Education to fund its programmes and activities, GH¢1.68bn was earmarked for the Free SHS programme.

Two years ago, in the second year of implementation of the policy, the government earmarked GH¢679.6m to be spent on the programme, out of a total GH¢2.1bn of oil money allocated to the ABFA.

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