Government Takes $30M Loan to Clear Fuel Subsidy Debt as PM Browne Defends Price Increase

The Government has borrowed EC$30 million to clear debts accumulated from keeping fuel prices artificially low, Prime Minister Gaston Browne has disclosed, offering new insight into the financial strain behind this week’s $2-per-gallon increase at the pumps.

Speaking on the Browne and Browne Show on Saturday, Browne said the loan was necessary to settle obligations associated with the fuel subsidy, which the Government maintained for months as international petroleum costs remained elevated.

The disclosure comes days after gasoline and diesel prices increased by EC$2 per gallon, ending a prolonged period during which the administration absorbed millions of dollars in costs to shield motorists from higher international prices.

Before the adjustment, gasoline was selling at EC$14.50 per gallon and diesel at EC$14.25, the lowest prices recorded across the Eastern Caribbean Currency Union in July.

Browne had previously revealed that the Government was losing substantial revenue by maintaining those prices. He said approximately EC$24 million in petroleum-related revenue had been forgone over about six months, while at least another EC$15 million had been paid to the West Indies Oil Company to help keep prices down.

The Ministry of Finance had recommended an increase of EC$3.50 per gallon, but Browne said he rejected such a steep adjustment and favoured limiting the increase to about $2 to reduce the immediate impact on consumers.

The fuel increase also came against the backdrop of a dispute with service station operators over the margins they receive on fuel sales.

Several privately operated gas stations closed on Tuesday as dealers took industrial action, forcing hundreds of motorists to turn to WIOC-operated stations that remained open. The operators had been pressing for an increase in their profit margins, arguing that their earnings had not kept pace with rising operating costs.

The disruption was short-lived, with most stations reopening after talks involving the Prime Minister and representatives of the dealers.

A 90-day review process was subsequently agreed to examine the concerns of service station operators and fuel haulers.

A special committee is also being established to examine a proposal to increase the dealers’ margin from the current 12 per cent to 15 per cent.

The latest developments leave the Government attempting to balance three competing pressures, protecting consumers from international fuel costs, limiting the financial burden on the Treasury and addressing concerns from service station operators about the viability of their businesses.

Browne has meanwhile warned that motorists could face further increases if international petroleum prices continue to rise, signalling that this week’s adjustment may not necessarily be the last if global conditions remain unfavourable.