By Ateh Thomson Pepeah (Political Economist)
Ateh Thomson Pepeah
Hon. Attempted; MezameCentral Const.
Ateh Thomson Pepeah |
Since 2009,
the government has worked harder towards accomplishment of her 2035
vision. Heavy projects have been initiated cooperation between the
country and foreign governments, and lobbies for sound partnerships have
been fruitful. However,growth rates have been sluggish, even with
minimal inflation rates. Following international pressure on the need to
cut back on fuel subsidies, the government of Cameroon on June 30,
2014.eventually considered this decision.
Under strict
economist perspectives, a cut back on fuels subsidies will imply a
positive and negative effect to the Cameroonian economy.The Problem lies
on which of these effects is more stronger.
Several
empirical studies have indicated a significant negative relationship
between subsidy removal and poverty reduction within various economies.
In Cameroon, it is important to recall that subsidies fall undercurrent
expenditures which benefits the now only and effects, very short
leaved. Creating more fiscal space by cutting back on fuel subsidies
therefore can lead to spending reallocation towards capital investment
on infrastructure,health care, and education etc in the long run.
Consider
for instance the Balance of Payment situation (BOP): My clairvoyance
reveals that a cut back in subsidies pushes up product cost and brings
about a visible long run reduction in domestic demand (Cameroonians
prefer trekking and car owners public transport). This extra fuel may
then accumulate for the international markets which subsequently
improves the Balance of payment situation but the TOT--Terms of Trade
becomes favorable too. Revenue from international trade in extras from
petrol--everything being equal then swell the national income of the
country.
According to the world bank report, subsidies
are said to only benefit the richest 10% of the population . They
stated that massive fuel subsidies reduces fiscal space such that
government have fewer sources to promote economic growth through
investment in infrastructure or human capital. That definitely worsens
income distribution in thecountry because most of the fuel subsidies are
enjoyed by the non poor,rather than by poor groups.Concretely this
imbalance should be address by such a solution with reallocation towards
more productive sectors.
However, these
reallocation policies might not be effective to compensate the adverse
impacts of the percentage removal of fuel subsidies if economic agents
try to seek gain through mark-up pricing over the increase of production
costs. Pumping stations all around towns have now added an inexplicable
50frs to the final cost of fuel and this is dangerous because it rather
motivates resistance to such policy reforms.
On a
General note, this decrease in fuel subsidies will be followed by a
decrease in macro-economic indicators, such as private consumption,
import s and gross domestic product (GDP), while other indicators, net
indirect tax and consumer Price index (CPI) will increase. On a more
technical bases adjustment effects, which result from real wage, price
and structural rigidities in the economy, add to the direct income
effect. Higher oil prices inevitably lead to inflation,increased input
costs, reduced non-oil demand and reduces the attractiveness of the
investment climate. Tax revenues tend to fall and the budget deficit
increases, due to rigidities in government expenditure, which drives
interest rates up. Because of resistance to real declines in wages, an
oil price increase typically leads to upward pressure on nominal wage
levels. Wage pressures together with reduced demand tend to lead to
higher unemployment, at least in the short term. These effects are
greater the more sudden and the more pronounced the price increase and
are magnified by the impact of higher prices on consumer and business
confidence. If not properly contended through non-violent government
economic and social responds measures, Violence becomes inevitable in
the near future.
In many countries like, the Philippine
etc, fuel subsidy removal despite relative government struggle came
with some rational attached to their argument. Firstly, their oil fields
as attested were becoming more and more empty—the natural resource was
getting exhausted. Secondly, they were little alternatives to depend on
than becoming net importers of oil. As such subsidy removal and
refocusing on other avenues that equilibrate living standards and
welfare of consumers became the best alternative .
In
Cameroon however, production and refinery capacity seems to have
stagnated not as a result of the absent of oil wells but due to lack of
investment in exploring new oilfields and declining production from
maturing fields. I hold the view that several other wells still exist in
the Country but have not been identified. This if taken seriously would
increase production given the rapid growth in consumption. In
addition,an increase in the middle class population also put pressure on
fuel demands. More and more youths are gaining access to cars, or
getting involved in productions that entail the use of fuel in Cameroon
.These figures imply that even if all the available domestic crude oil
were refined in Cameroon, it might not still meet the need of
Cameroonians faced with an apparent youth bulge . Therefor investment in
exploring new oilfields should be given a priority.
Again
the fuel allocation of administrators should be drastically reduced. It
will not be just having an office with very limited mobility yet being
allocated over 922millionFCFA for fuel alone while the common man bears
the entire burden. These reforms should be made known to Cameroonians
and the total about secured be channeled with full explanations towards
capital investments which enhances growth.
More
especially, the government should implement—not promise–compensation
programmes to mitigate the obvious effect of subsidy removal. This
programme might included cash transfer, health insurance, education
subsidies and also rural infrastructures development. In the Philippine
in 2008 for instance after cutbacks on subsidies, the Government
launched a package of pro-poor spending programs that were financed by
windfall VAT revenue from high oil prices. The policy package included
electricity subsidies for indigent families, college scholarships for
low-income students, and subsidized loans to farmers that reduced their
cost relatively. In addition, the Government distributed subsidized rice
to low-income families and started a conditional cash transfer program.
The option went well and was successful. In Cameroon the situation is
delicate, not only fuel prices but cooking gas prices have sore. This
heavily affects house wholes and the majority student population—youths
for that matters. If the Cameroon government can actually adapt this
measures, it is possible, this policy would go through without major
hitches. This should urgently be done before trade unions all around the
country finalize their discussions and plans concerning the weeks
ahead.
Effective communication to the general public is
an eminent requirement to avoid misgivings that might transform in to
political instability.The Philippine government used this amongst other
measures in their case and it did worked for them in 2008.In Cameroon,
this will go peacefully only if deliberations in parliament by
parliamentarians validate such a pertinent policy with major impact on
the lives in their constituencies. So because, as at now, such a
defactor decision is unlawful for a law abiding country that Cameroon
should be.
In 2012, i wrote thus......."As
an indispensable catalyst within various sectors of pertinence in
affecting country prosperity , it holds therefore that no alterations of
this sector_( Transport) transmitted through increasing fuel prices
goes without kickbacks effects to the entire economy. Enough reasons why
governments should gauge economic policy in tandem to the countries
stage of development and corresponding welfare levels therein before
effecting such weighty adjustments. Without this, any other endeavor
only comes to challenging the initial essence of such policies. Fuel
subsidies for sure were intended to reduce the cost burden on
Cameroonians given government judgement at previous, that citizens
couldn't bare the entire cost and maintain a decent living standard. The
point was on welfare and how to better the same. If today, a cut back
on such subsidies (more than previous,) greatly dampens welfare, then
government must have challenged the essence of the same policy. Perhaps,
the economy might just need a little more time before getting ready for
such policies. This gauging must come from within the country, not
otherwise. for what worked else where must not necessarily be the case
with Cameroon(consider the Structural Adjustment programs--SAPs)....
Here we are!!!
I strongly
belief,Cameroonians are not cowards. If fighting, they fight for a just
course, if striking, it is just their rights they sick protection of.
Can the government proposes to the general public a more Specific,
Measurable, Attainable, Realistic, and Time bound compensation and
mitigation plan?
God Bless Cameroon!!!
Ateh Thomson Pepeah
Hon. Attempted; MezameCentral Const.
When News Breaks Out, We Break In. (The 2014 Bloggies Finalist)
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