ABFA Utilization in Bridging Inequality Gap in Ghana

1. 1. The study found that the Petroleum Revenue Management Act, 2011 (Act 815) as amended has some provisions to ensure that ABFA utilization leads to inequality reduction, albeit not adequate. These include the provision to spend a larger proportion of petroleum revenues to the budget and 4 of the priority areas listed for prioritization have the potential of reduce inequality, improve incomes and ensure access to basic social services such as health and education.

2. 2. Ghana’s economic growth was led by the oil sector since the commencement of offshore oil production in 2010. A comparison of the GDP growth for the oil sector and overall GDP growth shows a positive relationship between oil sector GDP growth and total GDP. In most instances, a decrease in oil sector GDP results in a proportionate decrease in overall GDP and vice versa.

2. 2. ABFA expenditure was not necessarily targeted at reducing inequality. Out of the total ABFA expenditure, less than a third (29.69 percent) was allocated to the three sectors (agriculture, education and health) with the greatest inequality reducing potential. It was observed that a total of 5.62 percent of ABFA over the past 11 years directly benefited rural
      areas under key sectors such as agriculture, health and education.

2. 2. Given the failure to assess and implement compensation mechanisms in the PRMA, the impacts of oil and gas exploration and production on livelihoods and cost of living in host communities coupled with the low expenditures on inequality reducing sectors can worsen inequalities in oil producing areas.

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