Maravi

Mutesa cautions govt over fuel subsidies

Mutesa cautions govt over fuel subsidies
By Fridah Zinyama
Thursday June 12, 2008 [04:00]

UNIVERSITY of Zambia (UNZA) development studies lecturer Dr Fred Mutesa has said it is important for the government to consider the effects of removing the fuel subsidies before a decision is made. Commenting on Secretary to the Treasury Evans Chibiliti's statement that the government will this month phase out fuel subsidies because the measure was proving to be very costly, Dr Mutesa said keeping the fuel subsidies may lower the cost of production in the country and allow for expansion of the economy.

"Of course it may impact negatively on the government fiscal policy with the danger of unsustainable budget deficit," he observed.
Dr Mutesa said removing the subsidies however might drive the cost of production upward and deter further investment growth.
"It may stifle economic growth," he said.

Dr Mutesa advised the government to clearly explain where it would invest the said US$15 million and whether the benefits of that investment decision would outweigh the benefits of fuel subsidies which the country is enjoying.

"It will be good to know where that money will be used and whether it will achieve the same objectives," he said. "It will be better to consider the effects in the long run before such a decision can be fully implemented."

Dr Mutesa said the implications of such a decision might work against the future growth prospects of the country.
Chibiliti on Tuesday said the government has been subsidising fuel since around August or September last year and that the action had become unfeasible to continue.

He said in view of the escalating fuel prices on the international market, it would be better for the government to utilise the US$15 million on other economic projects instead of fuel subsidies.

Chibiliti said the other factors contributing to the decision by the government to phase out fuel subsidies were the conclusion of long-term supply and financing arrangements for crude oil importation.

Labels: FREDERICK MUTESA, FUEL, UNZA

posted by MrK @ 4:21 AM