Petroleum Sector Deregulation will free up subsidy

Accra, Jan 24, GNA - Central Bank Governor, Dr Paul Acquah on Monday said the expected deregulation of the oil market in February would free up money currently being used in subsidizing the product to key areas of the economy to enhance growth.

Government spent over 1.8 trillion cedis last year as subsidy to consumers of petroleum products because of a spike in world oil prices. The initial budgeted amount was 750 billion cedis.

Speaking at Press Conference after a meeting of the Monetary Policy Committee, Dr Acquah said since the deregulation was to allow domestic prices of petroleum to be adjusted in line with development in the global market, it would remove the inefficiencies currently plaguing the pricing formula.

It would also take away the burden from government to find resources to keep the price at affordable levels for consumers. Imports of crude oil and refined petroleum products amounted to 816 million dollars last year, a 45 per cent increase over the same period in 2003.

Dr Acquah, however, allayed fears that any jump in prices after the deregulation would lead to a hike in the price of goods and services. He explained that due to the continuous decline in inflation, the stable exchange rate of the cedi against major international currencies and good fiscal and monetary environment, any price hike would translate little on the cost of goods and services.

"We have a proud framework within which price adjustment will be made and ramifications on price would be for the good," he said, and added that the impact on prices would be much felt in an environment of high inflation and foreign exchange volatility.