Controlling fuel prices is bad economics – PS Ggoobi

The government has no plans to introduce subsidies on commodities such as fuel next financial year as a way of easing high price pressures at the pump.

While addressing journalists on Thursday at the finance ministry, the permanent secretary to the treasury Ramathan Ggoobi said the proposal by sections of the public and some legislators do not make economic sense in a liberalised market.

“We are not going to give subsidies (on any commodity) next financial year. That you can expect because where this has been tried, it has not worked. Subsidies take money to the wrong hands,” Ggoobi said.

“We are not going to control (other commodities) market prices because that’s also bad economics. If you are not the producer of a product (or a service), why would you want to control the price? Let the market forces determine the price.”

Ggoobi was responding to concerns raised by journalists about the continued uptick in fuel prices and other commodities such as soap and the plans the government had in place starting next financial year to cushion the public.

He said that external shocks in form of rising commodity prices, supply disruptions, and the fallout from the geopolitics development in Europe have contributed to the rising commodity prices.

“The main cause of the increase in prices is external, nonetheless, the government will continue implementing fiscal and monetary policy interventions to ensure that the high consumer prices are contained,” he said.

Since April last year, neighbouring countries such as Kenya have been paying fuel marketers companies to keep diesel, petrol, and kerosene prices unchanged at the back of a global rally in crude that increased the shipping costs of refined fuel.

Source: New Vision

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