Accra, Feb. 3, GNA - President John Agyekum Kufuor on Thursday made another strong argument for the deregulation of the petroleum sector although he noted that it was bound to cause some shock to the system and said the Government would take a decision on it this year. "In the short term, it is likely to result in a rise in inflation," he said in his first State of the Nation address of his second term delivered to Parliament in Accra.

"However, several studies have been made and we believe that with goodwill and sound management, whatever problems will be encountered within the short term will be surmounted and that the economy will be healthier for this policy," President Kufuor said.

A cross-section of the society, including representatives of public institutions, civil society groups, the Diplomatic Community and Traditional Councils were in the House to have a first-hand knowledge of the one-hour address.

Stating the positive effects of deregulation, President Kufuor said it would free government budgetary resources and allow a cut down on borrowing and to increase allocations to vital social services. It would also allow the private sector to assume the role of a service provider within a well-regulated environment.

"Mr Speaker, this year Government will take a decision on the deregulation of the petroleum sector," President Kufuor said. "The continued handling by Government of the sector makes it difficult to respond appropriately to market forces when necessary." President Kufuor noted that at the moment, the unrealistic pricing made petroleum products in the country the cheapest within the immediate neighbourhood and prone to smuggling, adding, "the general laws of economic reality apply to Ghana and we cannot continue to pretend otherwise."

Paa Kwasi Nduom, Former Energy Minister, earlier this week said the framework for the deregulation policy was not yet entirely finalised, therefore unfeasible.

"We are now at the final stages of preparing the policy draft. As a matter of fact (today) we gave the final instruction to the Team that is going to draft the new legislation."

He said the new document would soon be placed before Cabinet and sent to Parliament for consideration to enable the private sector to have the right environment to participate beneficially in the petroleum sector.

Dr Nduom indicated that it was only when these were in place that the Government could begin to implement the next phase of the deregulation process.