Kufuor strikes against rising cost of living

Information reaching The Statesman is that President John Agyekum Kufuor will this week make a major announcement on the economy. The President's live broadcast to the nation, which is provisionally scheduled for 8:00pm tonight, will mention specific interventions aimed at reducing the cost of some petroleum products and some imported foods.

The Statesman can report that the taxes on kerosene, diesel and pre-mix fuel will all be reduced. Kerosene is used mainly by the poorer people in society. This relief measure is directly aimed at reducing the impact of rising crude oil prices, which have registered six-fold since 2002, nearing the $130 per barrel mark yesterday.

With the price of crude oil projected to hit as high as $200 per barrel before the end of the year, this relief measure could end up costing the Ghanaian treasury about $700 million this year.

Though no direct fault of the Ghanaian government, it has been, however, compelled by the biting social cost of the global food crisis, triggered by high oil prices, to do something for Ghanaian consumers.

In further acknowledgment of the debilitating effect of the rising crude oil prices and the escalating cost of food on the economy, the Monetary Policy Committee of the Bank of Ghana on Monday revised projections for single digit inflation by the close of this year, saying, "It is not possible'.

Consequently, the Monetary Policy Committee of the Bank of Ghana pegged the Prime Rate at 16 percent from the previous rate of 14.25 percent.

Central Bank Governor Paul Acquah, who announced this at a news conference in Accra, said "Given the shocks in the system, the horizon has to be extended beyond this year."

"Inflation and cost price pressures have increased amidst rising and volatile oil prices, and a surge in food prices. And, uncertainty about developing inflation has weighed down business and consumer confidence, while the general assessment of economic prospects remains strongly positive," the Central Bank boss said.

The rising costs of living across the world have become food for opposition parties" propaganda menu, from Ghana to the USA.

The intervention on the ex-refinery price of diesel is geared against the rising cost of public transport, which invariably affects the prices of goods and services, generally.

Pre-mix fuel is also targeted to assist the local fishing industry.

The relief measures shall also affect imported rice and certain selected items. Government is expected to relax import duties on rice, which has seen its price on the international market doubled this year.

A senior government source told The Statesman that government is demanding assurances from the major importers that the relief in rice duties will be directly passed on to consumers.

The presidential announcement was expected yesterday, but a Castle source said, consultations with stakeholders "had not been completed."

One school of thought had been for government to financially empower the Ghana National Procurement Authority as a temporary measure to import and distribute rice in large quantities, as a better way of guaranteeing low prices.

But, the idea, seen as a 'controlled price' measure, could not sit well with a government that prides itself on private sector development.

Crude-oil futures broke to new highs early Tuesday amid worries that increased production by Saudi Arabia won't be enough to appease demand. The June crude contract, which expires at the end of trading today, rose $1.28 at $128.33 a barrel on the New York Mercantile Exchange, after hitting a new high of $128.41 earlier on.

The NPP has increased the price of petrol by some 730% (from ¢6,400 cedis to 53,339 cedis), diesel by under 800% (5,963 cedis - 56,430 cedis) and kerosene from 5,963 cedis - 53,339 cedis).

But, research work undertaken by the Danquah Institute, a Cantonments-based research and policy analysis think tank, reveals that in 17 years, the (P)NDC increased fuel prices by margins which make the NPP figures comparatively insignificant.

For example, between March 1983 and April 2000, Jerry John Rawlings pushed the price of premium from 12.30 cedis to 6,400 cedis. That translates into 51,932%. This means that on an average, the price of premium went up by 2,885% every year under the PNDC/NDC.

Under the NPP, the break down corresponds to premium prices going up by less than 110% per every year under the NPP.

Worse still, in the last 17 of the Rawlings years, gas oil prices shot up 70,053% - from 8.50 cedis before March 1983, to 1,359 cedis on the eve of the Fourth Republic (6th Jan 1993) to 5,963 cedis in April 2000.

Worst of all, the price of a product used by this country's poor, kerosene rocketed up by 119,160% in the 17 years.

Kerosene, which the PNP government that the PNDC overthrew priced at 5 cedis went up to 1,125 cedis under the PNDC, to 5,963 cedis when the NDC was finally booted out of office.

Thus, under the PNDC/NDC record that John Mahama says should not be compared, for every year that they spent in office over their last 17 years, diesel prices went up by 3,892% and kerosene by 6,620%.

Obeng Owusu-Ansah of the Danquah Institute noted, "The NDC was able to take the tough decisions under dictatorship. Except at the time the quality of those decisions were not subjected to any independent scrutiny. But, under the Fourth Republic it appears decisions were taken more with elections in mind than the national interest."

Mr Owusu-Ansah further stated, "what is also remarkable is the fact that a barrel of crude oil was much higher under the PNDC than even under the NDC. In 1985, for instance, it averaged $26.92 per barrel, falling to $16.75 by 1993. In 1998, the crude oil price per barrel averaged as low as $11.91, moving up to $16.56 in 1999 and $27.39 by 2000."

He further disclosed that the average annual crude oil prices since 2005 have been $50.04, $58.3, $64.2 and over a $100 this year, respectively.

"We can say that, between 1982 and 2000 the average nominal crude oil price per barrel was $20. This translates into $22 for the 1982-1992 PNDC period and $18 for the 1993-2000 NDC period. For the last 8 years, the price has averaged above the $50 per barrel mark," the Danquah Institute researcher said.

Mr Owusu-Ansah observed that though crude oil prices had started to rise by 2000, "the NDC lost the political will to increase prices in the last half of the election year. President Rawlings only made noises about charging realistic prices but lost the courage to do what he deemed to be right."