Ghana’s government plans to stop fixing the price of fuel and other petroleum products to reduce its subsidy costs after the currency plunged to a record low.
“The foreign-exchange dynamics are not stable and the fluctuations are such that it adds on to the subsidy buildup,” Willie Shamo, director of petroleum at the Ministry of Energy, said by phone on Monday from the capital, Accra. “This is not sustainable. The decision is to allow market forces to determine prices and dictate the pace.”
The National Petroleum Authority, which sets fuel prices based on the international cost of petroleum products, increased the gasoline price by 9 percent in May after cutting it by 10 percent at the beginning of the year. The cedi has slumped 21 percent against the dollar so far this year. The foreign-currency losses are borne by the NPA.
The cedi fell as much as 1.6 percent to 4.1050 against the dollar on Monday and was trading at 4.09 as of 3:30 p.m. in Accra.
Ghana is struggling to curb a budget deficit that reached 9.3 percent of gross domestic product last year and that has undermined the currency and forced authorities to seek emergency aid from the International Monetary Fund. The government partially removed fuel subsidies in July last year to curb spending.