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Is the government fuel subsidy enough succour?

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By Moses S Bass

The current fuel prices in The Gambia have reached a historic peak resulting to  public denunciation. Despite the several press releases from the government regarding subsidies, citizens continue to suffer the burden of the rising global oil prices, a scenario which could have been avoided had the subsidies been sufficient and effective. The apparent failure of these subsidies to provide affordable services for ordinary citizens to adequately enjoy their normal daily lives have necessitated an enquiry on the objective behind their implementation. The very essence of this article is to do so from the lenses of efficacy and efficiency.

Subsidies by their nature as policy instruments generally promote social good and governments tend to implement them to ease the financial burden on producers and consumers by covering part of production cost and cost of goods and services respectively. Whether they are usually adequate or not is a matter of experience. According to the press release from the Office of the President dated 3rd September 2022, about D1.3 billion was spent on fuel subsidies between January to September and already D5.6 million has been allocated for the month of September. Although price stabilisation was stressed as the reason behind these so-called subsidies, the fact remains that citizens are facing the highest fuel prices in history and the government’s narrative that prices would have been much higher had it not been for its intervention is just not convincing. Where the buying power of a consumer is weak, a subsidy has no significant meaning if it does not translate to lower prices for the common man.

Going by the current pump price of D79.89 as updated by the Ministry of Finance, the masses are not encountering a price reduction nor are they paying the same pump price before the disruption that caused the price hike but rather spending more and as such, it will be much easier for a camel to go through the eye of a needle than convince an ordinary citizen that there is fuel subsidy in existence. If for anything, the subsidies have failed the efficacy and efficiency test for the simple fact that they have been unsuccessful in downgrading the burden on the ordinary citizens through the provision of services at minimal cost. The ever-increasing transportation cost due to skyrocketing pump prises has in effect created a cost-of-living crises in the country and considering the high poverty (48.6%) and unemployment (40%) rates, citizens have reached an untenable vulnerability level and there is urgent need for government to meaningfully intervene. What is presently unfolding is more of a publicity stunt  than tangible action.

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With such high fuel prices, the energy sector has effectively become a burden on the country’s economy, and it is no surprise that the government spokesperson and presidential adviser referred to it as “the cruel sector of the economy” in his latest presser. The Gambia as a net importer of petroleum products with zero production capacity is highly vulnerable to global oil market disruptions. Notwithstanding, the enactment of the 2016 Petroleum Products Act sought to remedy such occurrences by establishing mechanisms to guarantee security of supply and by extension price stability. Among other things, the act mandates the country to maintain a national strategic reserve and when matters become worse, the president to declare a state of petroleum products supply emergency. Since the latter is yet to happen, it could be assumed that our national strategic reserve is up and running but what remains unclear is why the price hike? Energy is crucial for economic development and social wellbeing and when affordability becomes an issue for the populace, government’s intervention must be adequately and sustainably designed to address the economic burden to promote a sense of energy equity.

Moses S Bass is a PhD candidate in Renewable Energy and Sustainability at the University of Santiago de Compostela, Spain. He can be reached at [email protected]

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