eBusiness Weekly
Tapiwanashe Mangwiro
Economic analysts have raised concern and called for decisive action on the possibility of increased cost-push inflation due to ever-increasing fuel prices.
The call comes as Zimbabwe’s monetary and fiscal authorities are envisaging a 20 percent year-on-year inflation level by year-end.
The country has generally enjoyed macroeconomic stability over the past year, but economists are worried about the contagion effect the month-on-month fuel price increases might have on the economy.
If left unchecked, the fuel price increases will have a domino effect that will threaten the economic objectives as spelt out by the National Development Strategy One (NDS1).
Fuel price increases will also determine how much inflation in the country will move, and its availability will be key as well. With 2021 ending with less fuel problems than the previous year, hope is that in the current year, fuel will be available always.
Prices of fuel have a push factor on prices as producers transfer the price increase to consumers increasing inflation in the economy.
“Many businesses have reverted to alternative power sources, such as fuel-powered generators, which have become even more expensive to operate given the increase in global oil prices that has rippled to the local US-dollar pump prices due to power supply failures,” Isaac Kwesu Chamber of Mines of Zimbabwe president said recently.
The hope is that fuel prices are at least kept in the balance and that the Treasury will rather reduce taxes than increase prices since fuel is already made up of more taxes than the price of the commodity.
“The ongoing fuel price increases should be moderated because they have got potential of negating the gains we have so far achieved on inflation over the past,” says industrialist, Kipson Gundani.
Dr Prosper Chitambara, a development economist, noted: “Under the Zimbabwean perspective, fuel is used at every turn of the production and cycle as such its upward review will have a knock-on effect to prices hence the need to always keep it stable for long periods.”
The increase in fuel prices every month on average means that cost of production on the local market is increasing by a bigger margin since fuel is an input at all levels of production. This means pressure on price increases remain high enough to maintain month on month inflation at the current levels. The increase in cost of production also hurts Zimbabwe’s export competitiveness in the region especially for manufactured exports.
It also means Zimbabwe will continue to be a lucrative destination market for merchandise produced in South Africa, Zambia and other Sadc countries which are landing in the local market at cheaper prices than locally manufactured products.
When compared to Botswana, Zimbabwe charges US0,30c more per litre for petrol which means Botswana charges an average of US$1,13 per litre.
Nambia sells petrol for US$1,03 per litre which means petrol is US0,40c less expensive in Namibia than in Zimbabwe. Lesotho and Mozambique both sell petrol for just under US$1,12 per litre and in eSwatini petrol costs US$1,07 per litre.
In South Africa, petrol retails for US$1,30 per litre which is US0,14c less than how much it sells in Zimbabwe. While in Zambia fuel costs US$1,04 per litre.
For long, Zimbabweans are being charged fuel prices which are beyond the regional average.
On top of the rising prices, importers pay about US$0.05 in levies, US$0.30 in excise duty and there are other charges like NocZim debt redemption levy as well as some taxes like carbon tax which is about 5 percent of the cost, insurance and freight value (as defined in the Customs and Excise Act).
It is economic analysts’ considered view that moderation of fuel prices will spearhead and strengthen the economy’s competitive resolve against its regional counterparts.
