- as cedi weakness, high fuel cost bite hard
If you are a worker on a fixed income, chances are that it could soon be nearly impossible to maintain the same quality of living you had at the beginning of this year. This is because the local currency has lost around 30 percent of its value in the last two months, while fuel prices have shot up 50 percent within the same period, according to President of Africa Investment Group, Dr. Sam Ankrah.
“These two components alone are killers. If we did the loss in cedi value from January 2017 at GH¢4.16 to today’s GH¢8.45 [against hard trading currencies], that is over 200 percent.”
This, coupled with a high inflation at 23 percent, rising cost of living and utility bills, according to him, means that the average fixed income earner is more burdened than ever, with no relief in sight.
With local pump prices of fuel set to increase significantly in this month’s first pricing window, according to Institute for Energy Security, workers could soon be in for an even tougher road ahead as any rise in fuel prices/transport fares, has ripple-effect on all food items on the domestic market.
On the direct impact of the rising fuel prices on workers, he said a Ghanaian who earns an average of GH¢5,000 monthly and buys 100 litres of petrol twice a month could be spending 20 percent of his or her income on fuel alone.
“We already know that fuel, as a percentage component of average income, is close to 20 percent for Ghanaians and less than 10 percent for UK,” he said.
Dr. Ankrah, a fellow of Chartered Institute of Economists-Ghana and an investment banker, said the most key issue, though, is the slide of the cedi, which has lost about 30 percent of its value in the last two months alone.
Against this backdrop and the fact that incomes are typically low in the country, he said it was unfair to compare the impact of the rising global fuel prices on Ghanaian workers to others elsewhere, especially the United Kingdom, where the pound remains stable and incomes among some of the highest in the world.
“The real issue is spending parity,” he said, adding: “Our cedi, in two months [March and April] is worth 30 percent less. So not only are we dealing with increasing fuel costs, but we are also dealing with cedi being in freefall.
“So in UK, yes fuel has gone up. But as a component of average UK income, it is manageable. In Ghana, fuel is 20 percent of average income. With a 30 percent loss in value of cedi, that’s another 6 percent to add to the cost of fuel as a percentage of income; before you factor in the rise in cost of fuel,” he further explained.
Buttressing his point on why a Ghanaian worker will feel the pinch of rising prices of fuel more than someone in the UK, and why the debate of the UK also experiencing hikes in fuel prices just as Ghana could be misplaced, he said the local currency depreciated against the British pound from £1:GH¢8.48 to £1:GH¢11.00 from January 2022 to March 2022.
He also warned that with the continuous currency depreciation, no matter how cheap fuel prices are, internationally, the local economy will continue to see an increase in prices.
He further questioned the usefulness of some taxes on fuel products, saying: “In Ghana the taxes don’t even get used to defray the existing energy sector debt. Tema Oil Refinery (TOR) is still not functioning despite TOR Levy.”