Capping fuel prices will further worsen fiscal deficit problem – BoG Governor
Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said capping fuel prices will further worsen the country’s fiscal situation deepening its deficit problem.
Speaking at the 108th MPC press briefing on Thursday, October 6, 2022, Dr Addison averred capping fuel prices is a wrong policy which must not be pursued by government.
“Capping fuel prices is not an innovation. In fact, it is a wrong policy. When you have fuel prices rising and you also have a budget deficit problem, who is going to pay for the difference of the cost of fuel?”
“That will create further fiscal subsidies and worsen your fiscal deficit problem that we are all trying to resolve. So on the contrary, we should really be pushing towards full cost recovery to minimize the burden on the budget,” he quipped.
The assertion by the Governor, is on the back of calls made by both citizens and energy experts alike, for the government to intervene and cap the prices of fuel to cushion consumers.
Increments in the prices of fuel at the various pumps, has partly been the result of the depreciation of the cedi.
According to the BoG, for the first 9-months of the year, government recorded an elevated overall cash deficit of 6.4 percent of GDP, against the revised programmed target of 5.0 percent of GDP.
Total receipts of GHS 51.49 billion (8.7 percent of GDP) over the review period, fell short of projected target of GHS 60.08 billion (10.2 percent of GDP), and represented 85.7 percent of the budgeted estimate.
Cedi depreciation may force marginal increase in price of petrol, LPG from October 1
Prior to the commencement of the first pricing window of the month of October, the Institute for Energy Security [IES] projected that the 4.26% depreciation of the cedi in the last two weeks of September, may force prices of petrol and Liquefied Petroleum Gas to go up from Saturday, October 1, 2022.
The price of diesel may however stay same.
According to the IES, despite the 8.41% percent fall in the price of Brent crude on the international market in the last two weeks, the cedi depreciation within the period is too much to bring prices of petrol and LPG down.
“The Cedi depreciation of 4.26% is enough to force prices of petrol and LPG to move upward in significant terms, irrespective of the marginal drop (1.59%) and the marginal increase (0.59%) in the price of petrol and LPG on the world fuel market”.
“The Institute for Energy Security (IES), projects some stability in the current price of diesel in spite of the 8.41% fall in the price of the product on the international market, as a result of the 4.26% decline in the value of the local currency against the US dollar,” it stated.
The national average price per litre of petrol is selling at GHS 10.90, down from GHS 11.30 in the last window, representing a 3.54% decrease. National average price per litre of diesel however remained unchanged at ¢14.45 as OMCs maintained their prices.
