Ghana has suspended the subsidy on residual fuel oil (RFO). This has compounded the country’s textile industry’s challenges.

Inflation and rising utility prices have already put pressure on business margins. The subsidy on RFO was withdrawn to ease the financial burden on the Price Stabilisation and Recovery Account (PSRA). The move is meant to ensure availability and supply of the product – a low grade of fuel oil, which contains the undistilled residue from atmospheric or vacuum distillation of crude oil and is mostly used by manufacturing industries.

Due to increases in global fuel prices and exchange rates, funds accrued through the Price Stabilisation and Recovery Levy – used in paying for subsidies on RFO and premix fuel – were not enough to meet the demand. The policy directive takes consideration of the growing concern about the sustainability of the account to meet under-recovery payment obligations for premix fuel and RFO.

At the start of the year 2022, the subsidy on RFO was 55 percent; then it was slashed by 15 percent around July and completely suspended at the start of November. Suspension of the subsidy is expected to lead to an impending shortage of textiles for the country in the coming days.