Ghana Drivers Queue to Fill up Ahead of Expected Fuel Price Hikes

Motorists in Ghana queued to fill up on Friday amid a gasoline shortage, while the government, which saw its credit rating cut by Moody's (MCO), looked set to raise pump prices next week to tackle the growing public debt.

Officials said the gasoline shortage, which began this week, was due to the government delaying payments to importers to cover the gap built up due to its fuel subsidies.

The finance ministry said it owed bulk distributors 304 million cedis ($92 million) and hoped to pay part of that by next week.

The head of the National Petroleum Authority (NPA) hinted that price hikes were on the way, and two top government officials told Reuters the move was likely to come next Tuesday.

"We believe the time has come for all of us to appreciate the need to pay the real cost of fuel so that the government can channel the expenditure on subsidies into some other critical social sector," NPA chief Moses Asaga said on national radio.

The government officials told Reuters that the NPA was due to review its subsidies next Tuesday.

"We expect the NPA to adjust prices upwards to reflect full-cost recovery," one said on condition of anonymity, as price announcements are only made by the regulator.

Ghana last year removed fuel subsidies to help narrow a spiralling budget deficit and restore macro-economic stability.

But the government quietly reintroduced them in April and has spent $85 million since then to help keep pump prices down.

Hiking fuel prices in Ghana, as in most countries that operate subsidy systems, is a tough political decision for the government. President John Mahama, whose government is battling to bring down a stubborn budget deficit and high inflation while supporting the sliding cedi currency, is keen not to inflict more hardships on the population ahead of elections in 2016.

Moody's rating agency downgraded Ghana's sovereign rating from B1 to B2 with a negative outlook on Friday, citing its deteriorating fiscal strength and rising public debt.

The finance minister said the government was aware of the issues raised by Moody's and was committed to redressing its imbalances. He added that Ghana was confident its fiscal position would improve by the end of the year thanks to offshore production.

Ghana, the world's second-largest cocoa producer and Africa's no.2 gold miner, began crude oil production from its offshore Jubilee field in December 2010.

The presidency issued a statement late on Friday saying the government would release some of its strategic fuel reserves to alleviate the fuel shortage.

"Frustrations"
On Friday, anxious motorists in the capital, Accra, drove from station to station only to be waved away by attendants asking them to try their luck elsewhere.

"So far I have been to five stations and this is my sixth. I don't know what to do next and it is frustrating," dejected Obolo Aglah, who drives an intra-city bus, told Reuters at a gas station in the suburb of East Legon.

Aglah said Ghana's leaders had failed to safeguard people's basic needs such as fuel and electricity.

"We don't have constant power. Water taps are not running and now we can't even get petrol to run our livelihoods. There is need for a change and it must be a total change," he said.

Two other motorists and a fuel station attendant told Reuters distributors were holding on to supplies in anticipation of price hikes next week.

The NPA's Asaga said on Friday the government had shown its commitment to pay part of the debt owed to bulk importers and said he hoped normal fuel deliveries would begin at the weekend.

"The NPA has been talking with the government, the Bank of Ghana and the Ministry of Finance, trying to explain the arrears situation, and I am happy to say that the government has shown serious commitment in releasing part of the money to importers," Asaga said without giving details.

Asaga said the central bank had also agreed to help provide foreign exchange to bulk oil importers as a temporary support to enable them to speed up the import process.

(1$ = 3.3100 cedis)

(By Kwasi Kpodo; Editing by Bate Felix and Hugh Lawson)