Eritrea says will cushion blow of high fuel costs

By Ed Harris

ASMARA, April 13 (Reuters) – Eritrea will subsidise public transport to cushion the inflationary pressure caused by a new increase of up to 25 percent in fuel prices, the information minister said on Tuesday.

Fuel has been rationed in the Horn of Africa country since September amid rising world oil prices and a shortage of hard currency in the heavily state-controlled economy.

Minister of Information Ali Abdu said the government would take some pressure off the fuel price increase by making public transportation cheaper.

“We are trying to subsidise public transportation so that the prices rise will not be followed by inflation,” he said.

In January, President Isayas Afewerki said Eritrea’s generous fuel subsidies were the key cause of the country’s hard currency shortage, the BBC reported.

“Normally we subsidise, especially for the lower class members of society who use kerosene and gas,” Abdu told Reuters. “We are subsidising a huge amount of money.”

Asmara consumer inflation was 29 percent in the 12 months up to September 2004, said a U.N. report published in January.

Fuel prices in Asmara increased to 25 nakfa per litre of gasoline ($1.67) and 12.10 nakfa ($0.81) for diesel, up from 20 nakfa ($1.33) and just less than 10 nakfa ($0.67) respectively, jumps of 25 and 21 percent.

In addition, kerosene prices rose from 7.54 nakfa ($0.50) to 9.05 nakfa ($0.60) per litre, while jet oil increased from 10 nakfa ($0.67) to 12.51 nakfa ($0.83) per litre, official sources said.

“This is a global phenomenon. The cost of production in the whole world is increasing, and naturally we are going to be affected by that increase because we are oil importers,” Abdu said.

The initial price announcement was made on Saturday by the Ministry of Energy and Mines in New Eritrea, a state newspaper.