Kufuor announces measures to "ease suffering"

President John Agyekum Kufuor yesterday announced a five-pronged intervention to arrest the escalating global prices of essential commodities including petroleum products, which has hit the country in recent times.

The measures include the removal of import duties on rice, wheat, yellow corn and vegetable oil, worth over a billion dollars.

Presenting the measures in a nationwide address yesterday, President Kufuor said government is already in consultation with its development partners to import and stockpile additional supplies of rice and wheat to enhance food security.

Importers, the President has directed, should reduce prices accordingly to reflect the new arrangement. To ensure that miscreants do not abuse the relaxed tax regime by re-exporting commodities to neighbouring countries, doing so has been declared a criminal offence.

“Indeed, it should be a criminal offence to attempt to re-export these items which are being declared tax-exempt purposely for the benefit of the local market,” he warned.

In a major boost for the fishing industry, the President announced the removal of excise duty and debt recovery levy on premix oil, which would immensely reduce the cost of this source of protein in the country and enhance the lives of many fisher-folks.

The third line of action as announced by President Kufuor is the immediate reduction of the excise duty and debt recovery levy on gas oil, kerosene and Marine Gas Oil as a result of which dealers in the products and transporters are being directed to reduce prices and fares to reflect the gesture for the benefit of consumers and passengers.

In the area of electricity, it was decided that there should be increased support for the production cost of the supply so relief can be enjoyed by consumers.
Towards augmenting the food crop stock in the country and ensuring good harvest, President Kufuor stated that government will subsidize the cost of fertilizer, worth over $7million, and work to make for effective distribution of the agricultural input.
The foregone measure, he noted, would be enhanced by an agricultural sector which he said performed satisfactorily over the past year.
The performance of the sector has resulted in the reasonable availability of local staples like maize, yam, plantain, cassava and cocoyam.
To ensure further food security in the country, President Kufuor disclosed that government is stepping up attention and investments in the agricultural sector.

“In this regard, government is directing the management of the Afforestation Programme to increase the planting of foodstuffs in the TUONJA demarcated areas around the country,” he said.

Local farmers, he said, are being encouraged to go into satellite farming in cooperation with the nucleus farm to boost locally produced rice with a re-launched Aveyime Rice Project.

In another boost for agriculture, the sector ministry has been directed to increase its supply of tractors at subsidized rates to farmers.

To the Millennium Development Authority (MDA), the President urged them to accelerate the pace of implementation of the Millennium Challenge Account (MCA) programmes in all the catchment districts of the campaign.

He stressed that the mitigating measures need the support of all sections of the community for effective implementation, adding, “I am appealing to all of you to rally behind government to ensure that our society goes through these difficult times with minimal stress”.

Much as the announced measures will involve scaling down on some development projects, he gave the assurance that policies designed to protect the vulnerable in society will not be affected.

Such protected projects, he said, include the School Feeding Programme, the Capitation Grant, the National Health Insurance Scheme, the Metro Mass Transport system, the National Youth Employment Programme and the Micro-Finance and Small Loan Scheme (MASLOC).

The President, in giving a background to the measures, pointed out that severe phenomenal developments have been the underlying factors, some of which are traceable to natural causes and others to market forces.

He observed, “These are cumulatively generating turbulence with complex and far-reaching effects on practically all the nations of the world, including our own Ghana.”

The global trends, he averred, have led to the dislocation of economies, rioting and strikes, pointing at the just-ended UNCTAD XII where the UN Chief devoted copious time on the subject of the world food crisis.

The country’s economy, he noted, has showed robustness and resilience in the face of the external shocks- a position mentioned earlier by the Governor of the Bank of Ghana in his first quarterly report on the state of the economy.

President Kufuor paid tribute to the Ministry of Finance and the Bank of Ghana for what he described as their able, disciplined and far-sighted management of the economy over the past seven years.

The resilience of the economy so far, he added, is also attributable to the stabilization of the national currency and rapid and substantial build-up of reserves which have increased the import cover from the low level of 2 weeks in the year 2001, to the current level of over 2 months.

The President’s tribute did not leave out Nigeria, which he said provided a supplier’s credit for the import of crude oil covering 30,000 barrels per day on a 90-day credit basis.

In an interview with DAILY GUIDE, Dr. Nii Moi Thompson, a renowned economist, explained that if the support is going to be a relief, it will not cushion the economy against the global external shocks.

“We need to implement long-term solutions to deal with this global upset than looking at a reprieve,” he said, adding, “Oil reached a new record of $135 on the U.S Mercantile Exchange yesterday, raising analysts’ conviction that it could skyrocket to $200 by the close of the year.”

Dr. Thomspon advised government to find a suitable solution in addressing the increasing price change on the economy than looking at hedging which is a more risky business.

“The monies being given to Standard Chartered Plc to enter into an oil hedging contract- a process in which a buyer places a contract to buy the commodity at a fixed price from the seller when there is an anticipation of a rise in the price of a commodity in future, to help protect the economy against the soaring prices, should be used to support the National Development Planning Commission (NDPC) programmes,” he suggested.

Removal or reduction in taxes on petroleum products, he stated, will still not solve the increasing transportation prices since there will be a total of GH¢1 deduction when taxes are totally removed.

On his part, Mr. John Awuni, Director of Corporate Affairs of Finatrade Group, when contacted on phone, described as welcome news, government’s decision to remove import duties on rice, cereals and petroleum products, saying the move would mitigate the efforts of the global increases in the price of crude oil and foods on Ghanaians.

He said importers should comply with government’s directive to reduce prices to enable consumers enjoy the full benefit.

On the excise duty and debt recovery levy on Kerosene, Mr. Awuni contended that people in the rural areas would now heave a sigh of relief since according to him, they depend heavily on kerosene for daily activities.

Even as Ghanaians suffer from the pangs of the price hikes, the President offered words of consolation by pointing at what he said is the gift of providence through the recent oil find.

Pumping of the Ghanaian oil, he said, would commence in the next two years- an approaching feature which points at a silver lining in the clouds above the country.

President Kufuor a week or so ago summoned a Cabinet meeting to discuss the global price hikes after which a statement was issued, assuring Ghanaians that measures would soon be announced towards mitigating effects of the rising prices.

Full Text

Good Evening Fellow Ghanaians,
Over the past few years, the entire world has been witnessing severe phenomenal developments and trends, some of which are traceable to natural causes and others to market forces. These are cumulatively generating turbulence with complex and far-reaching effects on practically all the nations of the world, including our own Ghana.
Some of the impact is engendering rapidly escalating costs in the commodity markets around the world. A typical example is the uncontrollable rising costs of petroleum products and food.
The whole world is concerned about these abnormal developments. Indeed, in many parts of the world, including some neighbouring countries in our sub-region, these harsh trends have led to dislocation of economies, rioting and strikes.
At the just ended UNCTAD XII, which took place here in Accra last month, UN Secretary-General Ban Ki-Moon devoted much time to discussing the global food problem. Since then, he has set up a task force to take the necessary steps to assist countries most affected by the turbulence in the market.
Thank God, because of its current strength and resilience, our national economy has managed to withstand the terrible shocks of the market so far.
For this, credit must be given to the able, disciplined and far-sighted management of the economy of our country by the government backed by the Central Bank, over the past 7 years.
The resilience stems in part from the strategic importance of achieving the completion-point of the HIPC initiative in 2004, and thereby freeing Ghana of indebtedness to the tune of about USD8billion from both bi-lateral and multi-lateral creditors.
The economy's resilience stems also from the stabilization of the currency, and the rapid and substantial build up of reserves, which have increased the import cover from the low level of 2 weeks in the year 2001, to the current level of over 2 months.
We must also not overlook the robust recovery of credit worthiness, which is recognized internationally. This was confirmed clearly last year by the over subscription of Ghana's Euro bond issue by USD3.2billion.
In this regard too, we should pay tribute to our sister country Nigeria for according Ghana, during the first term of this government, supplier's credit for the import of crude oil covering 30,000 barrels per day on a 90-day credit basis, and currently, 60,000 barrels per day on a 30-day basis.
Fellow Ghanaians, but for these pragmatic and far-sighted arrangements, our socio-economy would have long succumbed to the unfortunate circumstances that have befallen many countries within Ghana's development bracket.
This is the background from which government has decided to engage the nation on the measures which I am bout to announce to mitigate the effects of the rising costs of petroleum products and food in the country.
Over the past two years, the nation's crude oil import bill has risen from USD500million in 2005 to USD2.1billion as at the end of last year and is moving to USD2.5billion. And this is for the same quantity of oil. In November last year, the current budget was prepared on an estimated crude oil price of USD85 per barrel. Within the first quarter of this year alone this estimate has been overshot to beyond USD125 per barrel. As I speak to you now, the price is USD135 per barrel. The experts project that the price may rise as high as USD200 before the end of the year.
Fellow citizens, obviously, this trend is throwing the budget out of gear, and nobody could have predicted this. This is the main cause of the swelling costs of transportation, utilities and food, which are making life difficult for everybody.
In the face of these challenges, government has constituted a taskforce, which has been studying the situation on a continual basis so as to recommend such actions as would be necessary from time to time, until stabilization and normalcy are achieved. It is as a result of this that government has decided on the following measures for which the Minister of Finance has been directed to urgently seek parliamentary approval.
First, import duties on rice, wheat, yellow corn and vegetable oil are removed. Importers are therefore enjoined to reduce prices accordingly. Indeed, it should be a criminal offence to attempt to re-export these items, which are being declared tax-exempt purposely for the benefit of the local market.
The excise duty and debt recovery levy on premix oil are removed to assist our fishing communities.
The excise duty and debt recovery levy on gas oil, kerosene and M.G. Local (Marine Gas Oil), are also being reduced. Dealers in these products and transporters should, therefore, reduce prices and fares accordingly to the benefit of consumers and passengers.
Government has also decided to increase its support for the production cost of electricity to bring relief to domestic consumers.
Government will subsidize the cost of fertilizer and ensure effective distribution to farmers to assure a good harvest.
Fellow citizens, Government is already in consultation with its development partners to import and stock-pile additional supplies of rice and wheat to enhance food security.
Fortunately, agriculture has done well over the past year as a result of which local staples like maize, yam, plantain, cassava and cocoyam are available in reasonable quantities even during this lean season.
In addition to on-going policies and programmes, government is stepping up attention and investments in the sector. In this regard, it is directing the management of the Afforestation Programme to increase the planting of foodstuffs in the TUONJA demarcated areas around the country.
The Aveyime rice project has been re-launched with vigorous planting of the nucleus farm. Local farmers are being encouraged to go into satellite farming in cooperation with the nucleus farm to boost locally produced rice.
Further, the Ministry of Agriculture is directed to step up the supply of tractors at subsidized rates to farmers. It is also to accelerate the provision of small irrigation dams, and through its extension services oversee the supply of improved seeds and ensure an adherence to best practices among farmers.
The Millennium Development Authority is also directed to accelerate the pace of implementation of the Millennium Challenge Account Programmes in all the selected districts.
These measures need the support of all sections of our community for effective implementation. I am therefore appealing to all of you to rally behind government to ensure that our society goes through these difficult times with minimal stress.
Fellow Ghanaians, even though these measures will involve cutting down on some of our development projects, I want to assure the entire nation that there will be no cut back on the policies designed to protect the vulnerable of society. Some of these are the School Feeding programme, the Capitation Grant, the National Health Insurance Scheme, the Metro Mass Transport, the National Youth Employment Programme and the Micro-Finance and Small Loan Scheme (MASLOC).
Fellow citizens, in Ghana's current situation, the adage that there is a silver lining to every dark cloud holds true. Providence has been kind to us in the recent oil find, which has provided us with a bright light at the end of the tunnel. Pumping of the oil is programmed to start within the next two years. A carefully studied regulatory system to ensure transparent management is being prepared for parliamentary approval. Therefore, these difficulties of today should only be temporary. Let us therefore rally together confidently and look ahead into the future with hope and optimism.
Thank you and may God bless us all."