Do not kill MIIF! &#8211; Nii Addo Lawman writes

The 2025 Budget Statement and Economic Policy of Ghana proposes a significant amendment to the Minerals Income Investment Fund (MIIF) Act, 2018 (Act 978).

The amendment seeks to transfer 80% of mineral royalties originally retained by MIIF to the Consolidated Fund for infrastructure development.

This policy shift represents a fundamental change in the purpose and operation of MIIF, which was originally established to act as a sovereign wealth fund (SWF) for Ghana’s mineral resources.

The MIIF’s mandate under Act 978 was to manage and invest Ghana’s mineral royalties in ways that generate long-term financial returns for the country, ensuring economic stability even when mineral resources are depleted.

The decision to redirect all MIIF’s funds into government spending raises important concerns regarding the sustainability of Ghana’s mineral wealth, economic diversification, and long-term fiscal stability.

Below is an in-depth analysis of what this shift means for MIIF’s operations, followed by a comparative assessment of how other countries—particularly Norway, Bahrain, and the Netherlands, have managed similar funds.

Implications of the Proposed MIIF Amendment

Reduced Capital for Investment and Long-Term Growth

MIIF was designed to maximise value from mineral royalties by investing in high-yield assets, such as equity in mining companies, mining infrastructure, and global investment portfolios. The proposed amendment if passed by Parliament of Ghana will shrink MIIF’s capital base, leaving it with nothing for any meaningful investment.

At the same time, it is important to remember that the Minerals Development Fund Act, 2016 (Act 912), already mandates that 20% of mineral royalties collected by government must be allocated to the Minerals Development Fund (MDF) to support mining communities, research, and regulatory bodies.

As a result, MIIF’s ability toacquire stakes in Ghanaian and international mining ventures, invest in small-scale miners and develop local mining infrastructure, and diversify investments into non-mineral sectors could be severely weakened.

If Ghana fails to leverage its mineral wealth for long-term financial stability, it risks falling into a boom-and-bust cycle, where mineral revenues are quickly spent but provide no lasting economic benefits.

What is a Sovereign Wealth Fund?

The International Monetary Fund (IMF) defines Sovereign Wealth Fund as “Special-purpose investment funds or arrangement, owned by the general government. Created by the general government for macroeconomics purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets.”

Simply put, a Sovereign Wealth Fund (SWF) is a state-owned investment fund that is typically established using surplus revenues, such as those derived from natural resources (e.g., oil, gas, or minerals) or foreign exchange reserves.

These funds are managed with the goal of generating long-term returns to support national development, stabilize the economy, or preserve wealth for future generations. SWFs invest in a wide range of assets, including stocks, bonds, real estate, infrastructure, and private equity.

Ghana’s Risky Gamble: Why Gutting MIIF for Short-Term Spending Threatens the Nation’s Economic Future

The government’s decision toredirect 80% of MIIF funds into the Consolidated Fund essentially converts Ghana’s mineral wealth into immediate budgetary support, that prioritises immediate infrastructure needs over long-term economic stability a risky fiscal gamble.

While infrastructure investment is crucial, this approach undermines the very foundation of Ghana’s sovereign wealth strategy, stripping MIIF of its capacity to generate lasting financial returns—sacrificing long-term financial sustainability for short-term spending.

A well-managed sovereign wealth fund (SWF) ensures that natural resource wealth continues to generate income long after the resources are depleted. Global best practices from Norway’s GPFG and Bahrain’s Mumtalakat demonstrate that resource wealth, when strategically managed, can serve as a perpetual source of national prosperity—sustain economic growth even when resource revenues decline.

If Ghana’s MIIF follows the path of direct budget support, it risks losing its ability to act as a financial buffer for future economic stability. Again, if this policy is not reconsidered, Ghana risks becoming another cautionary tale of a resource-rich nation squandering its wealth instead of harnessing it for sustainable economic transformation.

Currently, Government of Ghana through MIIF owns stakes in strategic mining assets such as the BibianiMensin Gold and Chirano through its mother company Asante Gold. It also owns significant shares in Electrochem, which has the capacity to produce 1.2 million metric tons of salt, making it Africa’s largest salt-producing entity.

In the long-term, such strategic assets would yield dividends more than $1billion with current investments not exceeding $75million for just these mining assets listed. MIIF could easily grow to become a $10billion Sovereign Wealth Fund in the next 15 years if properly managed and that would generate sufficient funds to support government infrastructural projects over the period.

Risks to Mining Sector Growth and Investor Confidence

MIIF plays a critical role in stabilising and expanding Ghana’s mining industry, especially through strategic investments and financing of small-scale miners. With a reduced financial base, MIIF may:

Struggle to fund local mining expansion.
Lose its ability to negotiate favorable terms with multinational mining companies.
Deter foreign investment in Ghana’s mining sector due to concerns over financial stability.

These risks mirror historical economic missteps made by resource-rich countries, particularly the Netherlands and its experience with Dutch Disease.

Lessons from the Netherlands, Norway, and Bahrain: Avoiding Dutch Disease and Ensuring Long-Term Wealth

The Netherlands’ Experience with Dutch Disease: A Cautionary Tale

The Netherlands discovered large natural gas reserves in the North Sea in 1959, leading to an economic boom. However, the government used gas revenues primarily for public spending, failing to invest for long-term growth. This led to Dutch Disease, where:

The Dutch currency appreciated, making local industries less competitive.
Traditional industries collapsed, as the country became overly dependent on gas revenue.
When gas revenues declined, the economy suffered a severe downturn.

If Ghana follows this model—spending mineral royalties without reinvestment—it risks repeating the Netherlands’ mistakes.

The Norwegian Model: A Blueprint for Long-Term Stability

Norway established the Government Pension Fund Global (GPFG) in 1990, ensuring that oil revenues were invested globally instead of being spent directly.

This prudent approach:

Built a $1.4 trillion fund that now supports the economy even as oil production declines.
Invests in diversified assets (stocks, real estate, bonds) to protect against price volatility.
Limits government withdrawals, ensuring that only a fraction of oil revenue is spent each year.

Ghana’s MIIF was structured to operate similarly to Norway’s model, but the government’s decision to redirect 80% of royalties into immediate spending undermines this goal.

Bahrain’s Mumtalakat Fund: Strategic Investment for Economic Diversification

Bahrain established Mumtalakat, its sovereign wealth fund, in 2006 to manage state assets and ensure economic sustainability. Unlike MIIF’s proposed restructuring, Mumtalakat prioritises investment over direct government spending.

Instead of relying on oil revenues for budget support, Bahrain channels wealth into long-term investments.
Mumtalakat owns stakes in over 50 companies across various industries, ensuring that Bahrain’s economy is not overly dependent on oil.
The fund helps maintain investor confidence by ensuring fiscal discipline and economic stability.

If MIIF is given a longer investment horizon like Mumtalakat, it could have grown into a diversified financial powerhouse for Ghana. Instead, the government’s decision to transfer 80% of its funds weakens MIIF’s ability to replicate Bahrain’s success.

Alternative Approaches for Ghana’s MIIF

Rather than transferring 80% of MIIF’s royalties into government spending, Ghana can adopt a hybrid model that balances investment and infrastructure development.

A Balanced Revenue Allocation Model

Instead of diverting 80% of MIIF’s royalties, the government could:

Allocate 30% to MIIF investments for long-term growth.
Dedicate 30% to infrastructure projects via MIIF-backed bonds.
Keep 20% in a stabilisation fund to guard against commodity price fluctuations.

Resource-Backed Infrastructure Bonds

Instead of direct spending, the government could use MIIF as a platform to issue bonds backed by future mineral revenues. This approach:

Maintains MIIF’s capital base.
Attracts additional foreign investment.
Ensures infrastructure projects are funded without depleting mineral wealth.

Expanding MIIF’s Investment Portfolio

MIIF should diversify beyond gold and invest in critical minerals like lithium, bauxite, and rare earth metals, which are vital for electric vehicles and renewable energy.

The Right Path for Ghana’s MIIF

Ghana stands at a crossroads in its mineral revenue management strategy. The proposal to transfer 80% of MIIF’s funds to the Consolidated Fund may provide short-term fiscal relief, but at the cost of long-term financial security.

History shows that countries like the Netherlands suffered economic instability when they failed to invest their resource wealth wisely. Meanwhile, Norway and Bahrain secured their economic futures by channelling their revenues into well-managed sovereign wealth funds.

To avoid the mistakes of the past, Ghana must: