August 19, 2019

Zimbabwe’s latest fuel price increase: will basic commodities be affected?

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Takudzwa Chihambakwe

THE prices of petrol and diesel have been going up almost every week in
Zimbabwe since April, but will the hikes continue to impact on the prices of basic commodities and services?

On Sunday evening, the Zimbabwe Energy Regulatory Authority, Zera, announced a new price for fuel, with diesel now selling at ZW$9.36 from ZW$9.06, while petrol is now going for ZW$9.12 from $ZW9.01.

Zera says the high cost of landing fuel in Zimbabwe is due to Free on Board, (FoB) movements on the international market, and this is causing the incessant price increases of fuel and diesel.

The energy regulatory authority insists that fuel prices have always changed on a weekly basis since the multi-currency era, but because the prices were in US dollars, the shifts in pricing did not have much impact as is the case now when the southern African country adopted the Zimbabwe dollar.

“During the US dollar era we used to have different prices of fuel each week. However, I believe the difference is that we were dealing with small figures then, hence it was not too pronounced. “But, since we are using the RTGS dollars now the changes are more pronounced,” said Zera Chief Executive Officer, Eddington Mazambani.

The fuel price increases have triggered a widespread surge in the cost of basic commodities and services but economist, Persistence Gwanyanya believes there will not be any price increases this time around.

“Unlike before we are not likely going to see an increase in the prices of goods and services because fuel is going to be available and it will be sourced from the formal sector rather than from the informal sector where it was procured at very high prices,” explained Gwanyanya.

He added that there is most likely going to be a trend of price stability.

“We are most likely to see a stabilization in the prices because electricity supply is also improving. Fuel and electricity challenges where translating into a disaster that was causing price hikes.”

Gwanyanya also said with money supply restrained, prices are not going to rise.

“It is true that a fuel price increase is followed by an increase in prices of commodities.

“However, what we have now is that on the money supply side, there is a measure of restraint and reduction in money supply growth.

“Due to this, we cannot have an increase in prices not supported by money supply growth,” he explained.

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