HARARE- The government has with immediate effect raised the price of fuel by over 150% following serious supply outages on the local market which ran for almost a week.
In a statement in Harare on Saturday night, the President said “with effect from tonight fuel pump price of $3.11 per litre for diesel and $3.31 per litre for petrol will come into effect”
Previously diesel and petrol were fetching for an average of $1.28 and $1.38 respectively pump price but since October 2018, supply gaps became more pronounced as government failed to import sufficient stocks to meet the growing demand.
Zimbabwe officially pegs its pseudo currency (RTGS and bond note) at 1:1 to the USD and given the acute forex scarcity, the government has been failing to avail the required forex, resulting in the market gaps.
On the parallel exchange, traders are selling the USD at an estimated rate of USD $1 to $3.5 RTGS/Bond note and given this disparity, it is assumed government has been subsidising fuel importation given the commodity was sold largely in local money terms.
Overwhelmed by the import bill which came in at $629 million in November, the highest monthly bill since dollarization, and constrained exports faring at $472.9 million resulting in a trade deficit of -$157 million, the government has been clearly under serious pressure.
Fuel stations across the country have attracted long queues stretching for long distances of up to 5 kilometres even without signs of fuel.
Under pressure the Minister of Finance said on Friday that fuel worth $20 million was procured, after govt made a drawdown on one of the facilities secured last year.
However looking at latest trade numbers, it has become apparent that Zimbabwe can no longer sustain its fuel import bill.
In November alone Zimbabwe imported fuel worth $185 million which is 62% up on the same month in 2017.
Based on this data it would imply that $20 million worth of fuel would last on between 3 and 4 days meaning shortages would have been sustained.
Although demand is likely to taper off, the move to hike fuel price and maintaining its sale in local currency will trigger further price increases across the economy.
Although not envisaged it is likely that prices of basics, starting from next week will begin to adjust upwards, with the rest of the market following same in coming weeks.
Against these hikes, it is likely that February inflation will be in the hyperinflation range of 50% upwards. The trend from a November outturn of 31% will be sustained with mild increases for December and January, before the February sharp surge.
- Equity Axis News
