Government Rules Out Fuel Subsidies As Prices Continue To Escalate

Government Rules Out Fuel Subsidies As Prices Continue To Escalate

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By Spy Uganda

Kampala: Uganda won’t introduce fuel subsidies even after pump prices spiked following supply disruptions partly caused by war in Ukraine.

Subsidies and lowering the fuel tax would cost the government much-needed revenue and increase the need to borrow, Moses Kaggwa, an acting director at the finance ministry, said Thursday in the capital, Kampala. The Treasury receives 1,450 shillings ($0.41) from every liter of gasoline, he said.

Demand for fuel has rebounded with the reopening of the economy in January after two years of pandemic-driven restrictions. Gasoline prices have jumped 19% this year to an average of 5,300 shillings per liter.

Landlocked Uganda, which consumes 6.5 million liters of fuel daily, will allow a competitive environment and only intervene if dealers get “abnormal margins,” Kaggwa said.

The reopening of East Africa’s third-biggest economy will boost growth in the year through June to 4.5% and 6% in 2022-23, partly underpinned by government spending, he said. Uganda is investing in oil infrastructure projects to enable the country to start pumping crude in 2025.

As of 2016, Uganda held 2,500,000,000 barrels of proven oil reserves, ranking 31st in the world and accounting for about 0.2% of the world’s total oil reserves of 1,650,585,140,000 barrels.

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