Fuel prices to soar as government annuls subsidies

Prices of petroleum products will hit an all-time high as Government has opted to annul subsidies. The annulment in one of the provisions of the 2016 finance bill will be tabled in parliament during the upcoming budgetary session that begins next week.

The bill that projects Cameroon’s annual budget for 2016 at FCFA 4249.8 billion indicates that the State will no longer shoulder the burden of providing subsidies for citizens to buy fuel at cheaper prices as the case now. This means that the Cameroonian citizen will be at the mercy of the fluctuating fuel prices in the world market.

Against the backdrop of such a situation, economic analysts are expressing fears that the rising fuel prices could trigger a high rate of inflation in the country. The decision to annul fuel subsidies comes on the heels of the International Monetary Fund, IMF and the World Bank’s pressure on Government to cut the subvention.

The BrettonWood institutions argue that the subsidies are not an anti-poverty measure. They hold that the subsidies only benefit the rich who own cars, especially luxurious ones. But analysts state that an increase in petrol price will lead to an increase in the transportation in the country.

Government is dropping the fuel subsidies at the time when trade union of the land transport sector have issued an ultimatum, urging the powers that be to cut fuel prices before November 16 or grapple with a nationwide strike.

Following the adjustments in tandem with world market prices last year, a litre of petrol (super) now sells at FCFA 650, while gas sells at FCFA 600 a litre. In order to assuage the citizens from the assault of the world market price fluctuation, Government subsidised fuel to make cheaper at the filling station.

According to the Minister of Labour and Social Security, the burden is enormous. He argued that Government could use such huge amounts of fuel subvention to provide more social amenities to citizens. Between 2008 and 2013, fuel subsidies created a vacuum of FCFA 1.200 billion in the State coffers.

The State has also paid FCFA 157 fuel subsidies in the first six months of 2015. Observers are expressing fears that such an austerity measure could spark negative repercussions. Given that petrol production is in a steady decline (2.2 percent) in the country, the 2016 budget provides for a slight increase in taxes.

The draft budget tailored in tandem with the Presidential circular of last August 13, is expected to achieve a 6 percent economic growth in 2016, while confining inflation to 3 percent. Other indicators in the budget include the projection that a barrel of Cameroonian petrol will cost 50.4 dollar (a circa over FCFA 29.200) in the world market with 586.4 exchange rate.

In this perspective, petrol production has been projected at 34.6 million barrels. The 2016 budget, said to be balance in income and expenditure, stands at FCFA 4.249.8 billion as against FCFA 3.746.6 billion in 2015.

It indicates an increase of FCFA 503.2 billion that represents 13.4 percent. Non-oil revenue represents 58.1 percent of the budget. It is hinted that the budget is elaborated in a manner to achieve strong and sustainable economic growth and guarantee unemployment by accelerating production, improving on competitively and the business climate.

It has also been designed to improve access to funding, promote the emergence of local industries. Oil resources will generate FCFA 397.2 billion, while FCFA 2469.3 billion is expected to come from non-oil revenue.

Within the context of the draft budget, the State of Cameroon hopes to borrow FCFA 505.0 billion and grab FCFA 58.2 billion from foreign aid. It will raise some FCFA 300 billion from treasury funds, FCFA 100 billion from budgetary support, FCFA 275 billion from reserves and FCFA 120 billion from reserves in privatisation. The running budget stands at FCFA 1981.2 billion, while the investment budget is FCFA 1525.8 billion and pay debts of FCFA 742.8 billion.

The investment budget thus has an increase of FCFA 375.8 billion that represents 32.7 percent in relative terms. The bill was conceived to also ensure Cameroon’s hitch-free hosting of the African Cup of Nation (feminine football) in 2016 and the implementation of the Emergency Plan.