Fuel hikes, economic woes worsen families’ conditions.
The wealth of Ghanaian families is fading away as fuel hikes, labour market conditions and weak management of the economy leave families less to spend on their children at a time the country’s ability to fund social services remains hobbled by slow economic growth.
Since beginning of the year acceptable indicators such as the value of currency, inflation, interest rates, jobs, and fiscal positions which are used to gauge the prospects and growth of the an economy have all deteriorated, leaving consumers and businesses with less income for their families.
Over the past five months inflation has inched up by 0.4 percent to 16.8 percent as at the end of April, while the policy rate — benchmark interest rate — has also gone up by a 100 basis points to 22 percent in an attempt by the central bank to tame inflationary pressures.
At the same time, the value of the cedi has gone down by about 18 percent against the US dollar to fuel imported inflation, while government has failed to meet its revenue collection target for the first quarter of the year as Ghanaians continue to feel the recession impact and government continues to tinker around the edges.
Thousands of jobs are also being cut amidst a decline in economic growth as businesses reel under impacts of the severe energy crisis.
These developments have all conspired against Ghanaian families whose purchasing power is eroding every day as policymakers struggle to gain control over management of the economy — with economic recovery a distant wish.
The poor are therefore being hit harder than the rich with the rising inflation. The worst off, however, are the pensioners and people who have lost their jobs and are unemployed. This is because the retiree or unemployed individual is relying on his/her money kept in the bank — which purchasing power due to high inflation is eroding. Without the chance of benefitting from any economic growth in society, the unemployed individual is stuck with a higher cost of living without any compensation in any form.
Meanwhile, government’s education and healthcare obligations as well as social intervention programmes continue to grow — with the country still in arrears with statutory obligations such as the National Health Insurance Scheme, Livelihood and Empowerment against Poverty, School Feeding Programme, among others.
Consequently, pressure is mounting on government to reverse a decision by the National Petroleum Authority (NPA) to increase petroleum prices on the market by 9 percent.
The recent hike in fuel prices is a surprise to many Ghanaians — but not as shocking as the timing of the announcement, coming at the height of erratic energy supply that has dampened the confidence of businesses and consumers in an economy predicted by the IMF to see its lowest growth of 2.3 percent in over a decade.
The NPA announced the 9 percent increase in petroleum prices on the evening of last Saturday, a day disgruntled Ghanaians led by a number of indigenous celebrities protested in their droves about the deteriorating energy supply situation.
Aghast at the fuel increases, the Trade Union Congress (TUC), Association of Ghana Industries (AGI), opposition parties New Patriotic Party and Convention Peoples Party, have all issued statements in protest at the increase in fuel prices at the pumps.
The TUC said: “The recent upward adjustment of fuel prices can never be justified in the prevailing economic circumstances. We therefore call on the NPA to reverse the increases and engage all stakeholders for consultation on fuel pricing”.
The AGI — the umbrella body of businesses in Ghana — added: “Unfortunately, the fuel price increment comes at a time that businesses can hardly get any relief from the harsh economic situation. Business operations are currently surviving on generators at high fuel cost, and this is also being stifled with an increase in fuel prices. The cumulative effect of these challenges is the high cost of doing business. AGI can emphatically state that Ghana is fast losing its competitiveness as a country to sub-regional economies.
“The Association of Ghana Industries wishes to reiterate that businesses can hardly survive under these conditions, and is calling on government to quickly step in to protect industries from total collapse. AGI further urges government, as a matter of urgency, to take steps that prevent business activities from grinding to a halt.”
The NPP has called the increment insensitive, while the CPP has questioned government on whether it is in tune with the impact of its policy on Ghanaians.
According to the NPA, the increase in world crude prices and depreciation of the cedi are the reasons for the increment, as government wanted to guarantee the availability of petroleum products on the market amidst concerns by the Bulk Oil Distributing Companies (BDCs) that banks are withdrawing letters of credits to them — since several billions of dollars owed by the government from forex under-recoveries remain in arrears.
But the TUC argues the cedi depreciation — which causes the forex under-recoveries — cannot be cited for the latest hikes in fuel prices, and alleged that the BDCs have colluded to hold the state to ransom.
It added: “We believe that the overriding factor that has led to the increase has to do with the pressure the BDCs are putting on the NPA.
“We find it extremely appalling that in this period of a crippling energy crisis and its attendant debilitating effects on the economy and on the economic and social conditions of the good people of Ghana, NPA has found it convenient to increase prices of petroleum products in the interest of the so-called BDCs at the expense of the entire population of Ghana.
“We believe that these same BDCs are the ones preventing the full operation of the Tema Oil Refinery (TOR).”
The shutdown of TOR’s operation is a curious situation as many economists and energy analysts have over the years observed that the BDCs will continue to have a stranglehold on the economy as long as TOR remains redundant — by which reason Ghanaian consumers will continue to pay higher prices for fuel, which is eating into their savings.