The Association for Consumer Defence of Cape Verde (Adeco) called on Monday, 12 October, for the government to deploy any additional tax revenues generated by rising fuel prices to cushion the impact on production costs and consumer prices, proposing selective fiscal benefits for sectors including food production, electricity generation, and public transport.

“In this scenario of an extraordinary fuel price increase, we have to say that the government can increase revenues — one only has to note that VAT has risen in absolute terms,” said Marco Cruz, a member of Adeco’s board, quoted by the Lusa news agency.

According to Cruz, this potential fiscal headroom could be used to support activities that are particularly dependent on diesel, notably food production and processing.

“This fiscal space can be used to favour certain sectors,” he argued, proposing the allocation of a “fiscal benefit on fuel so that this increase does not affect production and does not further inflate the cost of certain goods” for consumers.

Cruz also contended that electricity generation, given its high fuel consumption, should benefit from “positive discrimination to ease pressure” on final consumer prices.

Public transport is another area the association identified as a priority for support measures.

According to Cruz, the government could study a mechanism anchored in the potential additional tax revenue — “without compromising revenues, and ensuring that the impact [of the fuel price increase] is smaller across the entire economic chain of the country.”

Adeco Proposes Fund to Absorb Fuel Price Shocks

Beyond selective fiscal benefits, the association is proposing the creation of a dedicated fund to mitigate the effects of exceptional fuel price increases.

The goal, Cruz explained, would be to have an instrument capable of “absorbing these increases during periods of shock.”

In October, fuel prices in Cape Verde rose by an average of 10.7%, tracking movements in international markets.

To soften the impact on butane gas specifically, the government decided to absorb 70% of the price differential associated with the planned increase. According to figures released by the executive, without this intervention prices would have risen by 19.18%, but the measure limited the effective increase borne by consumers to 5.73%.

Adeco is now calling for mitigation mechanisms to be extended, selectively, to other fuels — particularly those used in productive activities and essential services.

Last week, Prime Minister Francisco Carvalho announced that the executive is reviewing mechanisms provided under 2019 legislation “so that the country has more effective instruments for stabilisation and protection of households, transport, fisheries, and businesses.”