The Zimbabwe Energy Regulatory Authority has increased the price of fuel, a move which is poised to push further businesses from selling goods and services or quoting at an exchange rate above the ruling auction market rate. Prices of goods and services have been going up in US dollars – all of which risks pushing up inflation.
Recently, the Reserve Bank of Zimbabwe revealed that the country’s annual inflation rate could end the year between 35% and 53% up from an earlier estimate of 25% to 35%. This comes at a time when the local currency has dropped sharply on the black market. On the parallel market, the local currency has weakened to 180 against the US dollar currently for electronic transactions. However, the official rate stands at 87 to the US dollar.
With effect from the fifth of this month, in Zimbabwean dollars (ZWL$) Diesel 50 is now up to ZWL$$122.13 from ZWL$115.15 while Blend E20 now ZWL$123.71 from ZWL$118.42 previously. In USD terms Diesel 50 is now US$1.38 from US$1.34 while Blend E20 up to US$1.40 from US$1.38 previously.
Rise in fuel prices turn to increase the cost of production. This is further worsened by incessant power outages which forces businesses to use diesel generators as a backup power. Market watchers say the rising operating cost will be passed on to the final consumers who are already suffering eroding purchasing power from rising inflation emanating from depreciating exchange rate.
Economist Yona Banda said retailers in Zimbabwe are generally very responsive to macroeconomic events that affect pricing. “It’s fair for consumers to expect moderate increases in price levels.”
Given that this is the time farmers are busy with land preparations using machines that consume a lot of diesel, Believe Tevera, President of Tobacco Farmers Union of Zimbabwe (ToFUZ) said the increase in the precious liquid will negatively affect tobacco farmers who unwillingly sold their US dollar at a constant rate of RTGS$1-85 yet now they buying the same US$ at RTGS$180.
“This coming season as farmers we are not going to accept RTGS payments. All our costs now are in US$ and it’s not a secret that offshore buyers bring US$ to buy tobacco so what’s the reason not to give US$100 to farmers,” he said.
With the rise in price of fuel, players in the private transport sector are likely to increase their fares as a way of remaining in the business. If that happens, it is likely to add more pressure to the already stressed public transport system mainly dominated by the ZUPCO.
The southern African nation has struggled with acute shortages of fuel due to perennial shortages of foreign currency but supplies have improved in recent months after the government allowed companies to sell the precious liquid in US dollars – Harare