An energy economist, Aephaniel Owusu-Agyemang, has cautioned the government against extending measures to cushion fuel prices for too long, despite indications from Fitch Ratings that the intervention could continue if the fiscal burden remains manageable.
In its latest country assessment report on Ghana, Fitch Ratings projected that the government may extend temporary measures introduced to cushion fuel prices and protect consumers from rising petroleum costs. The agency said the intervention could continue if the monthly fiscal cost remains below 0.1 percent of GDP and can be offset by savings in other areas of expenditure.
According to the report, the government may be compelled to maintain the policy because of the impact rising fuel prices could have on inflation and the broader economy.
Speaking in an interview, Mr. Owusu-Agyemang said that although efforts to cushion fuel prices are understandable in the short term, they are not fiscally sustainable over a long period.
He explained that the government is already dealing with pressure from inflation, cedi depreciation, and the need to maintain fiscal discipline within its expenditure framework.
According to him, although the reductions at the pumps appear small, the overall financial impact on the economy is significant.
He noted that the government is currently using about two cedis to cushion fuel prices on diesel and 36 pesewas on petrol, stressing that while consumers may see only slight reductions, the cumulative cost to the state is substantial.
Mr. Owusu-Agyemang warned that continued efforts to cushion fuel prices could eventually affect government spending plans and place additional strain on the national budget.
He therefore urged authorities to conduct careful economic assessments before making any decision to continue the intervention beyond the current deadline.
The energy economist also welcomed Fitch Ratings’ improved assessment of Ghana’s fiscal outlook, attributing it to stronger reserves and reduced debt levels.
However, he warned that if the government continues to cushion fuel prices without proper fiscal analysis, Ghana risks weakening its current credit outlook and reversing gains made in restoring investor confidence.
He added that the government must strike a balance between providing relief to consumers and maintaining long-term economic stability.
