The 2025 budget proposal for Ghana seeks to amend the Minerals Income Investment Fund (MIIF) Act, directing 80% of mineral royalties to the Consolidated Fund for infrastructure. This plan risks undermining Ghana’s long-term economic stability and investor confidence due to reduced investment capacity. Learning from models in Norway and Bahrain, Ghana should prioritize sustaining MIIF’s function as a Sovereign Wealth Fund for future prosperity.
The 2025 budget proposal for Ghana indicates a substantial modification to the Minerals Income Investment Fund (MIIF) Act of 2018. It proposes reallocating 80% of the mineral royalties currently retained by MIIF to the Consolidated Fund to support infrastructure development. This change fundamentally alters MIIF’s original purpose as a Sovereign Wealth Fund (SWF) dedicated to managing and investing Ghana’s mineral royalties to ensure economic stability amid resource depletion.
This amendment raises significant concerns about the sustainability of Ghana’s mineral wealth, the potential for economic diversification, and long-term fiscal stability. The shift could compromise MIIF’s ability to adequately invest in Ghanaian and international mining ventures. Such a move risks placing Ghana in a cycle of boom and bust, where immediate benefits do not lead to lasting economic improvements.
A Sovereign Wealth Fund, as defined by the International Monetary Fund (IMF), is a state-owned investment fund created for macroeconomic purposes. These funds are formed from surplus revenues aimed at generating long-term returns to support national development and stabilize the economy.
The decision to channel 80% of MIIF funds into government spending prioritizes immediate infrastructure needs over sustainable economic growth—a risky strategy. While infrastructure is essential, diverting these funds undermines MIIF’s ability to provide lasting financial returns. Effective management of a SWF should ensure ongoing income generation long after the natural resources are depleted, as demonstrated by successful models in countries such as Norway and Bahrain.
Presently, the Government of Ghana holds significant stakes in integral mining assets and companies like Asante Gold and Electrochem. With intelligent management, MIIF could grow into a robust Sovereign Wealth Fund, providing more than $1 billion in dividends and supporting infrastructural projects.
Nevertheless, reduced financial capacity may hinder MIIF’s role in stabilizing Ghana’s mining sector. This situation may lead to difficulties in funding local mining expansions and affect investor confidence. Ghana needs to avoid the pitfalls of other resource-rich nations that failed to manage their wealth, such as the Netherlands—who faced economic downturns after excessive reliance on gas revenues without reinvestment for long-term growth.
Learning from the Norwegian model, which securely invests oil revenues and limits direct government spending, could provide Ghana with a more sustainable approach. Furthermore, Bahrain’s Mumtalakat Fund serves as an example for prioritizing investment in diverse sectors rather than relying solely on natural resource revenues.
Ghana could consider alternative approaches by adopting a balanced revenue model that maintains MIIF’s integrity while addressing infrastructure needs. This balanced strategy could allocate a portion of MIIF royalties for investment, infrastructure projects, and stabilization funds, along with innovative resource-backed infrastructure bonds to fund projects without depleting capital.
At this critical juncture, Ghana must choose a responsible path for managing its mineral revenues. Preserving MIIF as a thoroughly managed Sovereign Wealth Fund and targeting high-yield investments will safeguard the economic future of the nation while benefiting coming generations.
The proposed transfer of 80% of MIIF funds for immediate spending may yield short-term benefits for infrastructure but poses a significant threat to Ghana’s long-term economic stability. By learning from the experiences of other nations and maintaining a focus on sustainable investment, Ghana can avoid repeating costly mistakes. The emphasis should be placed on preserving the MIIF as a sovereign wealth fund and investing in a diversified portfolio for the benefit of future generations.
Original Source: citinewsroom.com
