Thank you for your thoughts on our paper on the impact of Ghana's fuel subsidy reforms. As one of the authors, let me respond as the discussion has raised key points related to these kinds of research and advocacy.
First, in any country we must acknowledge that changes in poverty rates due to fuel subsidy reforms on the one hand and any social protection expansions on the other hand, are likely to represent different groups of people. In our paper, for example, we underline that we are estimating the changes in poverty incidence at the overall national level. This means that while the rise in the national poverty rate due to the subsidy removal and its equal decline due to the LEAP expansion cancel each other out in the national headcount figure, the people affected are clearly not the same - it is not a neat one-for-one trade-off and should never be suggested as such. We must be careful in our messaging not to present (often) small social protection programmes as some kind of compensation for such reforms.
Secondly, these days, following the 2011 revision of its Proxy Means Test, the LEAP programme is well targeted (the best targeted national transfer programme according to the 2010 targeting review by the World Bank - with almost 60% of benefits reaching the extreme poor alone, compared to 2.3% from fuel subsidies). The programme's recent independent evaluation (link below) shows important positive impacts on a range of both social and economic indicators.
The point that Richard highlights on cost comparison is central in many countries. And indeed in Ghana, the fuel subsidies would have cost over 1bn USD in 2013 whereas LEAP costs about 20m USD per year - so a huge difference. Unfortunately however, it has been rather a moot point here in Ghana as the fiscal deficit stood at almost 12% by the end of 2013, long after subsidies where removed. The fiscal crunch in Ghana led the government to immediately look for spending cuts and fuel subsidies were an unavoidable target. This is why it was even more important to successfully advocate for a continued expansion of LEAP rather than a stagnation or cut backs. It has been encouraging that political leaders so strongly back the programme and that the Government continues to fund the majority of its costs.
Chief of Social Policy/ACMA
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