Date: June 1, 2012, 1:36 pm


The International Monetary Fund (IMF) is at it again with one of its classical prescriptions for addressing challenges confronting economies of developing countries, to wit, the removal of subsidy from petroleum products by government.

This week a delegation of the IMF, which is on a visit to the country, called on President John Evans Atta Mills at the Castle, Osu and during the interaction that ensued, Christiana Daseking, the leader of the delegation, impressed upon the President that the 60 million Ghana cedis paid by government as subsidy on petroleum monthly was unsustainable, hence it should be removed.

Daseking predicated her submission on claim that subsidies on petroleum products inure to the advantage of the rich rather than the poor for whom it was intended.
But as the Integrated Social Development Centre (ISODEC) has pointed out, the proponents of the removal of subsidy on petroleum products as a measure of addressing economic challenges have not provided any empirically compelling evidence to justify the claim that petroleum subsidies benefit the rich than the poor.

It is recalled that in the 1990s, the argument was bandied about as part of the preparation towards deregulation under which subsidies were to be removed from the fuel pricing formulae. In respect of this, the World Bank sponsored a Poverty and Social Impact Assessment (PSIA) study of the policy. But for unexplained reasons the report was never made public for the purpose of open discussions on its findings.
ISODEC claimed that attempts to obtain a copy of that report were unfruitful and insisted that in the interest of our democracy, Ghanaians should have been told what recommendations were made in that report, and be allowed to debate the adequacy or otherwise, of the recommended measures to counter the harsh effects of fuel price hikes within a deregulated environment.

Public Agenda agrees with ISODEC that subsidy on fuel offers opportunity to support various critical sectors of the economy, and in that process promotes the well-being of the citizens, particularly the economically challenged. Additionally, subsidies provide support to agriculture, industry, water and electricity sectors and their withdrawal will accordingly lead to higher fuel prices and could have undesirable economy-wide effects. Similarly, as ISODEC cogently maintains, it will mean higher transport cost for most workers, higher food prices, higher production cost for the manufacturing sector where boilers are used, and where as a result of unreliable supply of electricity, generators tend to be used a great deal.  It could also result in higher cost of utilities such as water and electricity as fuel constitute a substantial component of their production cost.
We want to associate ourselves with ISODEC's belief that perhaps other unintended beneficiaries are reaping the benefits of the subsidy on petroleum pricing. Private vehicles are mostly the ones cited here, though we note that government machinery itself is a large consumer of fuel.

While recognising the fact that petroleum exacts a huge proportion of the government's foreign exchange earnings, Public Agenda thinks it is important and fair to know how petroleum consumption is distributed among private transport, public transport, the industrial sector, the mining sector, the government sector and the power generation sector. "We can only know who is benefiting most from the subsidies when we know what the consumption pattern is. Those who are categorical that the current situation generates inequitable outcomes, we insist, have the responsibility to prove that, this is the case," a position by ISODEC which we wholly share without any hesitation.

We urge the government to be bold and defy any move by the IMF to pressurise it to withdraw the subsidy. This is an opportunity for the government to prove beyond reasonable doubt that it indeed upholds the principles and philosophy of social democracy.

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