[ 2012-06-02 ]

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), to 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 earning, 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 fulfil 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.

Source - Daily Graphic

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