20110922
Reuters
YAOUNDE (Reuters) - Cameroon's fuel subsidy bill may top $600 million by the end of the year, 25 percent over budget, as the central African nation seeks to shelter the public from rising global energy prices in an election year.



The International Monetary Fund has warned Cameroon that the subsidy, which has kept retail prices at about the same level since deadly riots over food and fuel prices in 2008, is hurting the country's finances and should be phased out.

Cameroon's state-run Hydrocarbons Prices Stabilisation Fund said on Wednesday the total subsidy on fuel products for the year to September was at 233 billion CFA francs and could reach 300 billion CFA by year-end.

The government had budgeted 240 billion CFA francs.

"Despite the important gap between real prices and prices at the pump, the government has maintained the prices of petroleum products at current levels...for among other reasons, the need to support households," the fund said in a statement.

Analysts have said Cameroon's government is eager to avoid a repeat of the 2008 riots that killed more than 100 people, particularly ahead of a presidential election on October 9 in which incumbent leader Paul Biya will seek a new term.

The International Monetary Fund said in its September country report that fuel prices at the pump have not been adjusted to reflect world market conditions since the riots, adding "a significant burden to the budget".

It urged the government to phase out the subsidy by moving to automatic price adjustment and developing better social programmes that effectively target the poor.

The IMF also said the subsidy was penalising the local refinery, SONARA, which buys light crude at market prices from Nigeria and Equatorial Guinea because it is unable to process the heavier local blends.

Brent crude oil prices have risen 37 percent since a year ago to near $107 per barrel. Prices at Cameroon's pumps, meanwhile, have held unchanged with petrol at 565 CFA francs per litre and kerosene at 350 CFA francs per litre.

A hike in retail fuel prices would have a knock-on effect for other products and services in Cameroon -- boosting taxi and bus fares, and prices for items such as bread and beer.

Cameroon's subsidy on petroleum products rose 3.7 percent month-on-month in September to 28 billion CFA francs.