Impact of fuel price hike said to be detrimental

Gas Pumb
Ethiopia's fuel import roughly accounts for 20 percent of the total import bill.

By Asrat Seyoum & Dawit Taye

Following the international fuel price surge, the Ministry of Trade and Industry on Thursday introduced a corresponding adjustment of the local fuel price.
The increase is set to seriously affect section of the society whose livelihood depends on fixed monthly income, an economist said. Dr Kostentinos Berhe told The Reporter that with the current dearth in foreign exchange supply and the galloping inflation rate, it was not possible to keep on subsidizing the price of fuel. He said any attempt to subsidize fuel prices would in fact contribute to worsening the inflation levels of the economy.

Kostentinos pointed out that the primary focus when dealing with fuel price escalation should be on reducing the import bill. He indicated that the country annually pays a huge sum to import fuel and noted that long distance transport vehicles were partly to blame for such a large consumption level. He argued that a better fuel-efficient transportation system like a well functioning railroad network would help to reduce fuel consumption considerably.

Ethiopia’s fuel import roughly accounts for 20 percent of the total import bill.

According to the new fuel price adjustment, a liter of ethanol-blended benzine costs 13.43 birr while gasoil and kerosene are sold at 11.11 and 9.83 birr a liter, respectively. The price of ethanol-blended benzene increased 82 cents. The price of jet fuel and unpurified gasoil has also surged. When the price of these oil products is compared to their level nine years back, it has shown a 38.8, 37.5 and 35.02 percent growth on average, respectively.

The 2007/08 Ethiopian Economic Association annual report projected that Ethiopia’s fuel import bill would increase to 2.43 billon birr in the year 2013/14, gobbling up 99 percent of projected export earnings.