Opinion – Temporary fuel tax cut has no impact on economic growth

The reduction in fuel prices at the pump is a manifestation of government and stakeholder engagement in concerted efforts to revamp the economy through austerity measures as enshrined in the NPDs and HPPs.

We commend the government for this positive development, as the reduction was made possible by the sound economic policies pursued by the Namibian government. Fuel pump prices have had an effect on the cost of living, as fuel drives the prosperity of any nation’s economy, and therefore should be readily available and affordable. As the Russian-Ukrainian conflict continues to impact the price of crude oil globally, this has had a direct impact on fuel prices in Namibia. Even if the government lowers gasoline prices, the economy cannot simply grow because of lower gasoline prices. Only two to three months, then gasoline prices will rise more than they have been reduced.

The temporary reduction in fuel levies on all products is an opportunity cost for the actors who benefit from it. The use of estimates of the opportunity cost of oil can improve the assessment of the costs and benefits associated with alternative and development strategies, which helps to leverage the future well-being of its citizens. In addition, setting an appropriate opportunity cost for oil levies enables cost-benefit analysis and allows the country to decentralize its decision-making, which is necessary to encourage investment and thus promote economic growth and development. . As a business and economic analyst, the opposite is true if revenues decline because then a business may not break even or have very low margins and profit levels. The only scenario where a decrease in revenue is not detrimental to a business is when costs also decrease. If costs also go down, the business may be in the same overall financial position. Therefore, I am not convinced that the Road Fund Administration, the National Petroleum Corporation and the Motor-Vehicle Accident Fund will have sufficient financial resources to carry out their mandates. It is important to note that the levies and taxes imposed on petroleum products serve equally important funds such as road maintenance, the national budget and financial assistance to road accident victims. The economy can be unpredictable and no one can tell what the future will bring in an ever-changing world. The industry seems to be going through a tough time.

In addition, I expected the government to intervene on the prices of basic necessities and transport. This dynamic can be taken advantage of by regulating in consultation with transport operators to set a tariff. Market interventions can be taken by the government in terms of basic needs. The reduction will be significant if the government makes interventions related to transport or the operation of markets. Without this, lowering the price of fuel will be meaningless. The oil market is global and Russia’s withdrawal from the global supply chain has and will continue to drive up the price of oil. With no end in sight for the war in Ukraine, the price hike will continue. Geopolitical tensions and supply shortages will support high crude prices. The reason the government spoke of “temporary relief” means that we are unpredictable because we are reacting to a world that is unpredictable. The government will carefully monitor the situation and take monetary action.

As we accept that our world has changed, probably permanently, we are forced to face the fact that we can no longer count on a future that will look like what we expect it to. In fact, we have no idea what the near future will look like. Of course, we need to do what we can to figure out how to navigate the known changes. Living in an uncertain world will require a certain letting go. Living in the present, knowing that you’ve done everything you can to adapt and prepare, will help you feel more confident knowing that no matter what, you’ll find your way. Therefore, if the government was serious about reducing fuel prices, it should have restored prices to the original amounts that were there before the increases. This would have had a real positive impact on the economy. Otherwise, it’s just window dressing and it won’t help matters. But we should be grateful because it helps us to be at peace. Philippians 4:6 tells us, “Do not be anxious about anything, but in all things by prayer and supplication.” We should never fail to celebrate and recognize the efforts made by our government for the people and for the betterment of our nation and its pride.

The aim is to reduce fuel prices at the pump in an effort to lower the cost of living. The monetary value of levies and royalties adds up to significant dollars each year.

The government has a duty to protect its stakeholders, including consumers and businesses. The measure can undoubtedly become a stimulus for the economy thanks to the reduction in prices and the increase in the multiplier effects of consumption. The reduction will have different impacts and implications for different groups. A lower pump price is good news for end consumers. For fuel consumers, there will be a reduced price at the pump. This implies that one can afford to buy and use more fuel, or have more disposable income after fuel purchases. In all of the above, the ceteris paribus condition must be met. Institutions that derive revenue from fuel taxes and levies will see their revenue decline. They will either have to reduce their expenses, look for other sources of income, or do both.

To that end, I do not see the removal of price stabilization and recovery taxes leading to lower food prices, as many factors affect transportation. It’s not just about fuel prices, but also about spare parts, among other things. Even if you reduce fuel prices, that’s only part of the cost.

The other components are still intact, and they continue to increase. Thus, the reduction in the price of fuel alone will not be enough to offset the other costs. That’s why I say food prices won’t go down, transportation costs won’t go down, and the overall effect is that food prices will go up. The poor and vulnerable will bear the brutal brunt of this incessantly.

2022-05-13 Staff reporter