Ramathan Ggoobi, the PS at the Ministry of Finance.

Overview:

According to Ggoobi, whereas the subsidies appeal to the ordinary people, they are not sustainable.

The Secretary to the Treasury, Mr Ramathan Ggoobi, has said that subsidies are not the solution to the rising fuel prices.

A fuel subsidy is any government action that lowers the cost of fuel, raises the price received by energy producers, or lowers the price paid by energy consumers.

Fuel prices have been rising since October last year, with a litre of diesel nearly hitting the Shs6,000 mark.

But according to Ggoobi, whereas the subsidies appeal to the ordinary people, they are not sustainable.

“Subsidies appeal to the ordinary folk but are not sustainable. Market price signals created by forces of supply and demand are painful in the short run but are realistic and sustainable. Fuel is in short supply worldwide. So the most realistic solution is cut demand,” he said.

Mr Ggoobi was appearing on the KFM radio talkshow at the weekend. He was also reacting to a plan by the government of Kenya to remove its existing fuel subsidy.

“Subsidies appeal to the ordinary folk but are not sustainable. Market price signals created by forces of supply and demand are painful in the short run but are realistic and sustainable. Fuel is in short supply worldwide. So the most realistic solution is cut demand,”

ramathan ggoobi

He also reiterated that the government of Uganda will continue to use prudent economic policies to address the external shocks instead of using the budget (reserves).

“We shall not interfere with international oil prices to avoid creating shortages,” he explained.

Last week, Kenya Cabinet Secretary Ukur Yatani announced that A gradual adjustment in domestic fuel prices will be necessary “in domestic fuel prices will be necessary in order to progressively eliminate the need for the fuel subsidy possibly within the next financial year.”

While blaming the move on crowded spending Yatani indicated that even if the prices do not increase, “they are not expected to revert to levels experienced prior to the Russia-Ukraine war.”