End of fuel subsidy increases economic woes

The day after Guinea’s powerful trade unions put on hold a general strike aimed at pushing the government to improve living conditions, Guineans woke up to find the government had ended subsidies on diesel, gasoline and oil.

The price of a litre of petrol rose by more than 60 percent, from US$0.99 to $1.62, overnight. The cost of fuel at pumps will now rise and fall in line with international petrol prices, within a 4 percent margin.

“This [price] increase is the logical consequence of the soaring price of oil on the international market,” Mamady Traoré, the Guinean trade minister declared in a televised address on 31 March.

The Guinean government has long used fuel subsidies to quell tensions over the rising cost of living in the country. It last increased subsidies in June 2006 following union-led strikes over the cost of living.

El Hadj Gando Diallo, an adviser in the ministry of economy, finances and planning said the government had to end the subsidies as one of the conditions imposed by the International Monetary Fund (IMF) if it is to receive IMF funding in future.

Compensation?

Trade minister Traoré said the government will try to compensate people by suspending taxes on rice imports, increasing transport premiums for state workers, providing additional transport for secondary school students, and in the longer term by trying to reclaim more of the debts it is owed by internal debtors to compensate.

However some Guineans said that that the knock-on effect of rising fuel prices on food and other household goods could tip the country back into chaos.

“Life is becoming increasingly expensive. I fear the young people will go out into the streets again to protest the high cost of living. This could have grave consequences,” housewife Djamilatou Tounkoura told IRIN.

“I will now pay US$73 per month to travel to work on a salary of just US$67 per month. Transporting my children to college each day costs US $1.17 on top of that,” complained a government official in the housing ministry.

Root of problems

“It is unfortunate for us who thought that 31 March, the deadline for government compliance on the January agreements, would lead to long-awaited change that might alleviate our suffering. But instead it is the opposite,” said Alhassane Sow, a trader in Conakry’s Medina market.

According to Sow, a 50 kg bag of rice now sells for between US$29 and US$36 - the same prices the country faced during a period of hyper-inflation that pre-dated the January 2007 general strike and civil protest.

The rise in fuel prices is a global phenomenon that has already caused unrest in several West African countries in 2008, including Cote d’Ivoire, Burkina Faso and Cameroon.

“We thought it was [President] Conté who was at the root of our problems and that with the appointment of [Prime Minister] Kouyaté, everything would settle. But unfortunately we realise that neither of them can deliver happiness,” said Sow.

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