Consultation needed on petroleum price hikes - Abbey

Accra, May 3, GNA - Dr Joe Abbey, Executive Director of the Centre for Policy Analysis (CEPA), a non-governmental think-tank, said on Wednesday that broad consultation was needed on how to share the burden of the increasing cost of crude oil prices.

"All minds must be brought on board to determine the way to share the burden," Dr Abbey said at the launch of CEPA's review and analysis of Government Economic Policy for 2006.

He said, while there was no easy solution to the rising current high cost of fuel, government must compare the likely consequence of any policy choice to determine which was equitable to ensure development. "Any policy choice must be balanced against the long-term development needs of the country," he said.

Dr Abbey said government must consider whether it was plausible for consumers to bear all the cost or to reduce taxes and expenditure, adding that each option had its implications for the overall development of the country.

"A reduction in taxes will mean loss of revenue and non-execution of certain development programmes while the burden on the consumers can also spark social concerns."

Meanwhile, CEPA has predicted increasing donor inflows for 2006, citing the fruition of the Millennium Challenge Account and the multilateral debt cancellation initiative, which is expected to erase some 4.2 billion dollars of Ghana's external debt as reasons. The Centre said the real Gross Domestic Product growth for 2006 would be about five per cent since the economy had entered the upswing phase.

"It is recommended that the package of policies ensures that the recovery is enhanced without rekindling inflationary expectations and inflation," Dr Abbey said.

Touching on development in the financial sector, Dr Abbey said lending rates of interest had remained "stubbornly high". According to him when adjusted for inflation real lending rates declined during most of 2005 and ended up at 10 per cent by the close of the year. But with inflation expected to fall to single digit in 2006, the real interest rate could rise to 15 per cent.

"This will be burdensome on the real sector of the economy to say the least," Dr Abbey said, adding that a major challenge for the economy now was how to liaise with the banks to realign lending rates in favour of real sector activities.

CEPA also called for greater transparency in budget implementation with the sectoral, spatial and gender dimensions as well as efficiency of capital expenditure better aligned to the growth and poverty reduction objectives.