Fuel subsidy bounces back as Cedi falls

IMANI, a leading policy think tank in Ghana says the Mahama-led government has secretly re-introduced fuel Subsidies on the downstream petroleum sector, contrary to the International Monetary Fund (IMF) advice.

“Fuel Subsidies are back, quietly at $3m a week and could be more”, one of the most authoritative voices in the downstream petroleum sector in Ghana, said to a second query by IMANI staff this week,” it noted.

The re-introduction of the subsidies may be influenced by the depreciation of the cedi against the dollar, rising inflation and the declining crude oil prices on the international market, The Chronicle understands.

IMANI had been informed by operators in the downstream sector two weeks ago, of the introduction of subsidies.

This development, IMANI’s Research Assistant, Sylvester Kofi Boahen, lamented it had the potential of derailing a vital component of Ghana’s IMF’s bailout package.

He explained: “As part of remedial actions required by the IMF support programme, the Government has stated that it intends to strictly implement the existing automatic price adjustment mechanisms for utility tariffs and fuel prices to eliminate subsidies (except for items that benefit from cross subsidy in the petroleum price build-up and the life line consumers of utilities).

“This is in line with the expenditure measures agreed in the home-grown policy, as well as in the consultative sessions the Government held on the economy (Senchi Forum).

It is hoped that with the IMF watching, the government with the understanding of Civil Society will display the political will to coherently apply the pricing formula and eventually end meddling with the fuel market”.

Mr. Boahen concluded in his article that the government’s precarious financial position as evinced by Moody’s recent downgrade, suffocating debts and the IMF assistance was incontrovertible proof that the Government must cease its unsustainable petroleum subsidy policy.

He wondered why a cash-strapped government would subsidise petroleum products, saying: “There is ample evidence to support the fact that petroleum subsidies are misplaced and ill-targeted”.

The ordinary Ghanaian will be better served by government channeling funds to provide an improved and efficient mass transportation system, rather than the mindless pursuit of unsustainable subsidies, Mr. Boahen advised.

It would be recalled that the Ghanaian government in 2012 announced the removal of fuel subsidies, following an increase in crude oil prices and the depreciation of the cedi.

Ghana, which joined the club of oil producers in West Africa 2010, had come under increased pressure from the IMF to remove the fuel subsidies.