The International Monetary Fund (IMF) has urged the Government of Ghana to ensure its recent fuel subsidy measures remain temporary and well-targeted, warning that prolonged subsidies could undermine the country’s fiscal recovery and macroeconomic stability.
The warning was contained in the IMF Staff Report submitted to the Fund’s Executive Board on July 27, ahead of the approval of Ghana’s Sixth Review under the Extended Credit Facility (ECF) programme.
The caution comes after the government announced a GH¢2 subsidy on every litre of diesel for the month of August to cushion consumers against rising fuel prices. According to the Ministry of Energy and Green Transition, the intervention could cost the government about GH¢500 million if maintained throughout the month.
The IMF acknowledged Ghana’s improving economic outlook but stressed that fuel subsidies should not become a permanent policy tool. It warned that extending the programme beyond its intended period could reduce government revenue, widen the fiscal deficit and threaten gains made under the IMF-supported reform programme.
Responding to the concerns, Energy and Green Transition Minister Dr. John Jinapor said the subsidy is strictly a one-month intervention and will be reviewed before any decision is made on its continuation. He said the government would assess prevailing market conditions and other relevant factors while monitoring developments to protect consumers and maintain stability in the downstream petroleum sector.