Government’s GH¢2 diesel subsidy offers timely relief, not a long-term solution – IES

The Institute for Energy Security (IES) says the recent depreciation of the Ghana cedi is preventing consumers from enjoying larger reductions in fuel prices, despite the government’s intervention to cushion the impact of rising global oil prices. Senior Research and Policy Analyst at IES, Derek Emmanuel Xatse, said exchange rate movements remain one of the key factors influencing petroleum prices in Ghana, alongside developments on the international crude oil market. Speaking on Joy FM’s Top Story on Monday, August 3, he noted that although the government has introduced a GH¢2 per litre subsidy on diesel, a stronger local currency would have translated into even lower pump prices.

“The cedi for the past weeks has also been depreciating, which is not good for Ghanaians because rather than that, we would have been having more reduction at the various pumps,” he said. Mr Emmanuel Xatse explained that Ghana’s heavy reliance on imported petroleum products means fluctuations in the exchange rate have a direct impact on the final prices paid by consumers. He said the recent subsidy provides welcome relief, but the weakening cedi continues to offset some of the gains that could have been realised.

According to him, stabilising the local currency should form part of the government’s long-term strategy to protect consumers from recurring fuel price shocks. “The long-term measure is that the government has to look for more money to be able to cushion consumers,” he said, adding that broader macroeconomic stability would also help sustain lower fuel prices. The Institute for Energy Security (IES) has welcomed the government’s decision to subsidise diesel by GH¢2 per litre, describing it as a timely intervention that will help cushion consumers against rising fuel prices and ease inflationary pressures.

Speaking on Joy FM’s Top Story on Monday, August 3, Senior Research and Policy Analyst at IES, Derek Emmanuel Xatse, said the announcement aligns with the institute’s earlier recommendation that government step in to protect consumers from the impact of surging global oil prices. “That is good news for all Ghanaians because IES earlier this morning also put out a press release suggesting that government should act immediately to cushion consumers. Having this response is good news for all Ghanaians and stakeholders in the energy sector,” he said.

He noted that rising fuel prices affect every segment of the economy, whether commercial operators, private businesses or individual consumers. “One way or the other, we are all affected, whether for commercial activities, private businesses or other things,” he added. While welcoming the intervention, Mr Emmanuel Xatse said he would have preferred the subsidy to also cover petrol consumers.

“Who would have thought that it could be extended to cover petrol consumers? That would have been another good news for us. But be that as it may, what we have right now is a measure that the government has implemented, and in a nutshell, it’s to cushion consumers.” He cautioned, however, that the subsidy is unlikely to be sustainable over an extended period because of the significant financial cost involved.