Date: June 7, 2012, 10:53 am


ISODEC CAUTIONS GOVERNMENT ON REMOVAL OF SUBSIDIES ON PETROLEUM PRODUCTS


The Integrated Social Development Centre (ISODEC), a civil society organisation, has expressed concern about attempts by the International Monetary Fund (IMF),ˆto foist on the government, a decision to remove subsidies on petroleum products.

It says it is also worried about the seeming willingness of the government to embrace such as policy.

According to ISODEC, the IMF’s advice to the government was premised on the perception that fuel subsidies benefited the rich more than the poor, and ,therefore, the need to re-allocate such subsidies to areas that would most benefit the poor.

Expressing its concern in a statement signed by Dr Steve Manteaw, the Co-ordinator of ISODEC, it said the current IMF advice had revived the old topic of the cost and benefits of fuel subsidies adding that, “while the debate raged and gained much prominence in the 1990s, none of the proponents have yet provided a convincing empirical evidence to support the view that fuel subsidies benefits the rich more than the poor.”

It recalled that in the 1990s, as part of the preparation towards deregulation under which fuel subsidies were to be removed, the World Bank sponsored a Poverty and Social Impact Assessment (PSIA) study of the policy and that for unexplained reasons the report was never made public for the purpose of open discussions on its findings.

“It is only fair, we believe, and in the interest of our democracy that Ghanaians were 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 prices within a deregulated environment,” ISODEC said.

It explained that subsidies were given to remove some type of burden and was often considered to be in the interest of the public in addition to protecting domestic industries, especially, the strategic ones and of cushioning the poor against the vagaries of the market.

In the Ghanaian situation, the ISODEC argued that subsidy on fuel offered the opportunity to support various critical sectors of the economy and, in the process, promoted the well being of the citizenry.

“Withdrawal of subsidy will, therefore, lead to higher fuel prices and would have undesirable economy-wide effects. It will mean higher transport cost for most workers, higher food prices, higher production cost for the manufacturing sector where boilers are used,” it said.

While the ISODEC agreed that petroleum exacted a huge proportion of the government’s foreign exchange earnings, it was of the view that it was important and fair to know petroleum consumption was distributed among private and public transport, the industrial and mining sectors, the government sector and the power generation sector.

ISODEC said it could only know who was benefiting most from the subsidies when the consumption pattern was known and challenged those who were categorical that the current situation generated inequitable outcomes, to prove their case.

It inferred that given the fleet of government vehicles and with the increased number of ministers, deputy ministers and other assistants such as presidential staffers and members of government’s communication team, the government was a major consumer of fuel in the country, for which reason, a withdrawal of fuel subsidies would have a knock-on effect on government budget and domestic debt.

The ISODEC said without the government and its donors providing evidential justification the entire deregulation policy and the rush to implement it at this moment had no credibility and was not entirely justifiable.

“It may simply seem a measure to fulfill a prior IMF commitment and if the government goes ahead regardless of this boding, it will pay a high political cost for it,” it stated.

 



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