US$310m received for Petroleum Holding Fund for H1 2020

Petroleum Funds

The Petroleum Holding Fund (PHF) posted US$310.14 million as the amount of money received for the first half of the year.

A Bank of Ghana (BoG) semiannual report on the PHF and the Ghana Petroleum Funds (GPF) said the figure comprises of lifting proceeds from the Ghana Group, surface rentals, PHF income and corporate income tax.

The total petroleum revenue distributed was US$322.57 million.

The Ghana National Petroleum Corporation (GNPC) received US$80.41 million, Annual Budget Funding Amount (ABFA) received US$169.50 million whiles Ghana Stabilisation Fund (GSF) and the Ghana Heritage Fund (GHF) received an allocation of US$50.85 million and US$21.79 million respectively during the period under review.

GHF and GSF total return year to date (YTD) was 5.28% and 0.39% respectively.

Realised income on the GPFs in H1 was US$8.57 million (GHF contributed US$7.14 million and GSF contributed US$1.43 million) as compared to H1 2019 total net realised income of US$11.20 million (GHF contributed US$6.72 million and GSF contributed US$4.48 million).

GSF and GHF accumulated reserves were US$133.34 million and US$608.54 million respectively.

The Petroleum Holding Fund Account (PHF) at the end of H1 2020, held a balance of US$0.42 million which comprised surface rental of US$0.014, corporate tax of US$0.21 and a mandatory balance of US$0.20 million

Performance of The Ghana Petroleum Funds

In H1 2020, the difference between the U.S. 10-year Treasury note yield and the 2-year note yield widened by 29.88% from 18.76 % in January 2020 to 48.64% at the end of June 2020.

This follows a 9.62% increment from 24.82 % in June 2019 to 34.44% in December 2019. The U.S Treasury launched a 20-year treasury bond for the first time since 1986 to help fund borrowing during the period under review.

The 3-month Treasury bill fell by 141 bps from 1.54% to end Q2, 2020 at 0.13%. The U.S 10-year Treasury note yield fell by 85 bps from 1.51% in January 2020 to 0.66% in June 2020, while the yield of the 2-year note tumbled by 116 bps from 1.31% in January 2020 to 0.15% at half year-end leading to a steepening of the yield curve.

Among the reasons accounting for this steepening of the yield curve were the net improvement in risk sentiment over reopening of the U.S economy, potential success in coronavirus vaccine development, upside surprise of the U.S May employment situation report offset by renewed geopolitical and social unrest, U.S-China trade tensions and health warnings of a premature reopening. The general fall in yields across all tenors during H1 led to an increase in the capital appreciation of bonds as prices increased, improving the marked- to-market performance of the Ghana Petroleum Funds.

The total return on investment of the Ghana Heritage Fund (GHF) year to date (YTD), (1st half of 2020) was 5.28% as compared to 4.71% (1st half of 2019). The two-year annualised return (2Y (A)) of GHF was 6.58% whilst the three-year annualised return (3Y (A)) was 4.26%.

The Ghana Petroleum Funds returned a net realised income of US$8.57 million compared to US$11.20 million in H1 2019.

The Ghana Stabilisation Fund contributed 17% or US$1.43 million to total net income compared to US$4.48 million in H1 2019 whilst GHF contributed 83% or US$8.57 million compared to US$6.72 million in H1 2019.

The GPFs reserves at the end of H1 2020 was US$741.88 million (GHF was US$608.54 million and GSF was US$133.34 million) compared to US$977.36 million in H1 2019 (GHF was US$521.82 million and GSF was US$455.53 million). Withdrawals from the GSF in the amount of US$307.54 million in H1 caused the fall in the GPFs reserves and led to a fall in realised income for the H1 2020 compared to H1 2019.

Outlook for 2020

While the severity of the economic impact from the coronavirus remains highly uncertain, the BoG said there are economic scenarios that the future performance of the global economy will depend on.

The International Monetary Fund’s (IMF) G-20 model assumption depends on the evolution of the virus. In the baseline scenario, global activity is expected to slow in Q2 2020, followed by a strong recovery in 2021.

The two alternative scenarios are outlined below:

Scenario one (1): A second global wave of covid-19 outbreak in early 2021.

Scenario two (2): A faster than expected recovery in the second half of 2020. The materialization of these could cause growth to fall or rise above its baseline projection.

“In the coming months, policymakers’ main focus will be on the evolution of Covid-19 news related to infections, fatalities and associated medical interventions.

“The crystallization of these risks continues to create a flight to quality with safe-haven bond yields falling and impacting positively on the marked-to-market valuations of the portfolios of the Ghana Petroleum Funds,” the report noted.

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