Fuel subsidies could lead to new taxes, warns Ghana tax analyst

Ghana’s government must set clear limits on fuel price interventions or risk creating a growing fiscal burden that could eventually lead to new taxes, tax analyst Francis Timore Boi has warned.

His comments follow the government’s announcement of a GH¢2-per-litre reduction in diesel prices, its second fuel price intervention in four months. The measure is intended to ease pressure on consumers, prevent increases in transport fares and help contain inflation.

Speaking to Citi Business News, Mr Timore Boi accepted that the intervention would provide immediate economic relief. However, he said the government needed to establish clearly defined conditions for when it would intervene in the fuel market.

He proposed a rules-based system linked to movements in global crude oil prices. Under such an arrangement, government support would be triggered only when international prices reached a specified level.

“Can we limit the number of times or can we set a threshold for government intervention? For example, if crude oil reaches around 120 dollars per barrel, government can then step in to cushion consumers,” he said.

Mr Timore Boi said the absence of a formal policy framework could create an expectation among consumers and transport operators that the government would routinely absorb increases in fuel prices.

That, he argued, could make it more difficult for authorities to introduce future reforms, both politically and economically, if international oil prices rose sharply.

“My principal concern has always been whether this approach is fiscally sustainable and also the expectation it creates,” he stated.

The analyst noted that when the first intervention was introduced in April 2026, global crude oil was trading at about 101 dollars per barrel. Although prices have since fallen to approximately 87 dollars per barrel, the government has announced a further round of fuel price relief.

He questioned how policymakers would respond if crude oil prices rose substantially in the coming months and placed greater pressure on the domestic fuel market.

“If crude subsequently increases to around 120 dollars per barrel or beyond, will government continue to absorb two cedis per litre, increase the relief, or allow the full cost to be passed on to consumers?” he asked.

Mr Timore Boi warned that maintaining fuel subsidies over a prolonged period could place significant strain on public finances. If the costs continued to build, he said, the government might eventually turn to additional revenue-raising measures to fund its spending.

He referred to the fiscal response during the COVID-19 period as an example of how temporary interventions can later result in new taxes. Emergency government spending during that period was followed by the introduction of the COVID-19 Health Recovery Levy to help finance public expenditure.

“Repeated interventions accumulate fiscal costs, and those costs may later be presented as justification for introducing a new tax,” he cautioned.

Although consumers are likely to welcome measures that reduce the cost of fuel, Mr Timore Boi said the government had to weigh that short-term benefit against the need to maintain long-term fiscal discipline.

Without limits on the frequency and scale of interventions, he said, temporary support could become a recurring obligation for the state. In turn, the financial burden could ultimately be transferred back to taxpayers through higher or new taxes.