A potential reduction in fuel prices in Ghana is being welcomed by consumers, but it is also raising concern over the wider impact on government revenue and the economy.
Former Managing Editor of the Insight Newspaper, Kwesi Pratt Jnr, speaking on Good Morning Ghana on Metro TV on April 15, said the development has both positive and worrying signals.
“A potential reduction in fuel prices is being welcomed as relief for consumers, but concerns are growing over its wider impact on Ghana’s economy,” he said during the discussion with Moro Awudu.
Mr Pratt on the programme said reports suggesting a possible cut of nearly five cedis per gallon would be “very significant” if confirmed.
“Usually, when prices go down, it is seen as a boost to the consumer,” he said. “It is supposed to make people happy. But we must also look at the full picture.”
He referenced a report by the Herald newspaper, which he described as credible, adding that the scale of the proposed reduction would be substantial.
“We are talking about close to five cedis per gallon. That is a huge amount,” he said.
He explained that fuel pricing in Ghana is shaped by a complex structure, including assumed benchmark prices.
“If you look at the price build-up, the base is an assumed price, often referenced to ex Rotterdam,” he said. “Because it is an assumed price, there is room for adjustments and possible savings.”
He also noted that taxes and levies account for nearly half of what consumers pay at the pump.
“Almost 50 percent of the ex pump price is made up of taxes,” he said.
According to him, some of these charges play a key role in stabilising the energy sector.
“The BOST levy, for example, allows the country to store fuel for emergencies. That is very important,” he said. “There is also the margin that ensures uniform fuel pricing across the country. Tampering with these could be risky.”
He warned that any reduction in fuel taxes could create a gap in government revenue.
“Any reduction means less income,” he said. “And if revenue falls, it will affect other sectors of the economy.”
He questioned how government would make up for the shortfall if the policy goes ahead.
“The budget was approved based on expected revenues,” he said. “If you cut fuel taxes, where will the money come from to fill the gap?”
He said more clarity was needed before any firm assessment could be made.
“We need to understand the impact before we can discuss it holistically,” he added.
