By Mahmud Tim Kargbo
Few months back, COI (Consumer Price Index) in Sierra Leone increased to 366.30 in December from 358.70 in November. (Source: Statistics Sierra Leone). Inflation of 13.6% for the Sierra Leone economy indicated some despair for households amidst the pandemic and the NATO Russia proxy war taking place in Ukraine. This inflation figure means that in comparison to January last year, prices have gone up by 13 percent for the basket of goods that a consumer in Sierra Leone typically purchases. From the governing SLPP Paopa manifesto, this seems an unreasonable number to expect and is a bad scenario for the consumers in Sierra Leone. Especially the suffering majority who the government promised to raise their standard of living.
For the Bio led government with it increasing level of public debt and large fiscal deficit. This could explain the need to hike the prices of petrol, diesel and liquefied petroleum gas (LPG) especially in the midst of the ongoing proxy war between NATO and Ukraine. Let me explain how a large fiscal deficit gives incentives for the government to increase taxes on the petrol.
With the inflation tax, the government of President Bio could increase prices either by increasing taxes on petrol or ask the Bank of Sierra Leone to print more money. The result of increasing taxes on petrol is that government get passed on to consumers as general increase in the price of petrol. The most obvious contender for such a huge increase in the petrol taxes is universal inputs used by most consumers in a country.
A key universal inputs in the production process includes fuel. The current huge increase in the price of fuel in Sierra Leone would likely increase transport cost and indirectly affect our day -to-day expenses. There’s more. Fuel acts as a national and universal input for product too. Farm products are moved from our villages to Freetown and other main cities and this transportation relies on fuel. The current hike on fuel affects Sierra Leone agricultural sector as farmers and distributors have lesser profit. So they pass it on to consumers.
Currently, as a result of public debt we must not properly feed our children because basic commodity prices are at an all time high.