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Opinions of Saturday, 22 February 2003

Columnist: Acheampong, Kwame B.

Doing the Difficult: The Politics of Pricing Petroleum Products in Ghana

“The benefits that would be derived from paying the right price for petroleum products would exonerate the government just as time had proved the decision to join the HIPC initiative to be one of the best things that ever happened to Ghanaians”.

(Albert Kan Dapaah, Ghana’s Minister of Energy, Ghanaweb.com, February 2003)

Democracy, the preferred form of government is always not easy to practice either in advanced or fragile democracies. Any attempt to raise taxes or cut benefits for the majority will usually encounter opposition, even if taking such measures is necessary for public good.

Politically unpopular and difficult task of increasing the price of petroleum products have been enacted by President Kufour’s administration in Ghana recently. It is indeed one of the most arduous tasks to be taken by the ruling government whose political tradition has not witnessed the control of government in the last thirty years. The politics of representative democracy quite often is about re-election. The question of this policy decision of “doing the difficult” of petroleum politics for political expediency would support or undermine Kufour’s government in the next general election?

This article would examine the politics of pricing petroleum products in Ghana giving the circumstances of the economic conditions of the country today: HIPC, inadequate fund mobilization, unemployment, slow-paced economic stimulation and so on. Although it is one of the most difficult and painful political decisions to have taken to salvage a bleeding economy yet it is worth sacrificing now to benefit in the future to exonerate a government that instituted HIPC which is bearing fruits today in Ghana.

From time in memorial, Ghana has always served as a conduit for cheap petroleum products for her neighboring countries particularly Togo, Cote d’Ivoire and Bukina Faso through smuggling. This lucrative business of would-be perpetrators and saboteurs of Ghana’s economy have benefited from a sustained subsidy of petroleum products by all past governments of Ghana. The sad part of this is that Ghana though lies in the heart of oil producing enclave of West Africa yet no oil of commercial quantities have been discovered. Oil importation consumes sizable portion of Ghana’s import bill but for the sake of “doing the difficult” politics no one government either civilian or military has ever made a tough decision to remove that subsidy to allow market forces to dictate the price of this all important product. President Kufour an ardent supporter of free market economy has decided to take this bold policy initiative to raise and mobilize internal revenue while at the same time curtailing smuggling of this product through the borders of Ghana. Hopefully with time, his administration would be exonerated as revenue of HIPC is supporting programs of the district assemblies and poverty alleviation across the country. Again, the intended target of raising the price of petroleum products in line with her neighboring countries would cease the demand for the products and that lucrative market for smugglers would die a natural death.

Indeed in most developed countries, raising bonds that are secured with taxes from such sources as gasoline, sales or property taxes, funds capital projects. Monies are sourced from capital market, such as pension funds, private banks and insurance companies with bond certificates to undertake such projects. Usually voters support such decisions through referenda if it is a legal requirement. On the other hand, in most developing countries capital projects are funded with monies from donors and international financial institutions such as World Bank and International Monetary Fund. But the stringent conditions and beaucratic pathways associated with the release of such funds make them less attractive to these struggling countries. President Kufour has experienced that since he assumed office from the Bretton Wood Institutions. Our highways are death traps for innocent Ghanaians from all walks of life. Schools are failing while hospitals and the delivery of health care are eroding the quality of life that Ghanaians and friends of Ghana that are visiting our country deserve. We need to take the bull by the horn to raise funds internally to support such important programs. Living conditions are becoming unbearable for the average Ghanaian; therefore the Government can just ignore this human suffering but to find solutions to the problems. Raising revenue from gasoline taxes could be one of the avenues to mobilize funds to undertake such capital projects for the short term. It is not conducive yet we sometimes have to sacrifice for the future on condition that policy practitioners would prudently apply our scarce resources to the appropriate targets of national interest.

By increasing the price of petroleum products, the Government is artificially removing the subsidy of the urban noveau rich who are majority owners of private cars at the expense of rural poor. This selective taxation from the rich would eventually help raise monies to fund major capital projects for the general use of all. Car and vanpool should be encouraged particularly in the urban areas while mass transportation must be improved to serve as linkage between the rural and the urban areas. Consciously managing the use of petroleum products would eventually improve environmental safety; decongest our urban thoroughfares while scarce resources for importing petroleum could be applied elsewhere in the economy to benefit Ghanaians today and the future.

Finally, “doing the difficult” is not economically right for the short term and politically dangerous for a sitting president whose eyes are fixed on the ultimate price of re-election. Yet President Kufour has made such tough decision for the country he loves so much at the detriment of his second term in office as a leader. It is a yeoman call for all Ghanaians to support his effort to succeed so is Ghana, our country.

Kwame B. Acheampong
Houston, Texas

Views expressed by the author(s) do not necessarily reflect those of Ghanaweb.