President Koroma relieves populace from the burden and repercusassions of increase in full pump prices
It is common knowledge that the pricing trend of crude oil has been on the increase since April this year, reflecting in corresponding increases in the world market prices of imported petroleum products (platts). Based on the formula used by the petroleum industry to regulate the pump prices of fuels in Sierra Leone, the calculated prices dictated increases in prices for all product; petrol, diesel, kerosene and fuel oil since May 2007, but by a special arrangement between the Oil marketers and government in March 2007, the former agreed to maintain the pump prices of fuel until the elections then scheduled for July, immediately after which the price changes would be effected. Unfortunately (from the Oil marketers’ perspective), the elections were postponed to August with the result of the first rounds indicating a run-off.
The delay in the implementation of a price change meant massive loss of revenue for the marketers, but no one can make such a major decision during the crucial elections period. The SLPP government considered it a political suicide to allow a price increase during the elections period, so had they won the elections, an increase in fuel price would have been their first gift to the already impoverished people of Sierra Leone. As fate would have it, the will of the people prevailed in effecting a landmark change of Government for which we are just beginning to realize the benefits of a leader who is touched by the sufferings of his people.
The first major immediate problem faced by the APC government upon assumption of office was how to handle the result of the increased platts which dictated increases in petroleum pump prices. The logical economic solution to this problem would have been difficult to explain to a populace eager to realize the fruits of positive change.
The Oil technocrats and financials experts recommended that we should allow the market forces to dictate the prices so as to maintain the economics of petroleum importation and continuous product supply, but this would have spelt disaster for the people. The president who has the overall responsibility not only for economic soundness and financial viability but also for the social and economic well being of his people took the initiative to step in with an intuitive solution that would preserve the economics and financial viability without the populace bearing the burden of increase fuel cost and the attending repercussion as have always been the case in the past.
Based on platt of the past month, the harmonized price of fuel should have been increased from the current Le 12,950 to about Le 14,500 per gallon for petrol, diesel and kerosene (12% increase).
From history we all know that a 12 % increase in price results in:
– at least 24% increase in transportation cost
– Corresponding increases in operational cost of all business entities.
– Over 24% increase in the cost of all goods because of the effect of increases in the above two factors
The resultant effect is not borne by business entities since all additional costs are passed on to the consumers who bear the brunt which translates into increase economic hardship.
To forestall this situation the president used his wisdom and authority to ensure that the increase be absorbed by a drastic decrease in road users charges from Le 1,341.00 per gallon on petrol and diesel to an average of Le 254.84, suspension of the strategic stocks funds, suspension of ports charges (US 3.0/MT) and suspension of freight levy (US 2.0/MT) effective 29th October 2007. He is also making all efforts to secure funds to subsidize the shortfall in revenue resulting from reduction and suspension of these charges.
From an Economist stand point, the government’s policy of not transmitting this hike to the consumers will pressurize its fiscal abilities. This to some extent might derail all macroeconomic indicators. If it does not pass on inflationary pressures to the consumer, then our current deficit account might widen further and the government would face a budget deficit at the end of the year. Yet, the Leadership of the APC is ready to stake it all in the interest of Sierra Leoneans.
Hopefully all things being equal in the international geo-political arena, the oil price is expected to fall by the end of the year in line with historical trends. The recovered gains would then be reabsorbed to stabilize the pricing structure. If however the oil price continue to rise from the current US$93/barrel to over the US$100 threshold, the economic effect would be worldwide and the President would not be expected to perform a miracle. Our only hope is that by that time we expect to have realized the effect of effort being made by the government to improve the national power supply which would cushion the impact of any unavoidable future price change.
It is our responsibility therefore as responsible citizens to continually uphold our leader in prayer so that God will endow him the wisdom, favor, courage and passion to accomplish his vision for our beloved nation.
By the Illuminites