Fuel price drop to ease inflation, reduce prices

Sunday News Reporters

THE Minister of Finance and Economic Development, Professor Mthuli Ncube, has said the continued reduction of fuel prices will help ease inflation and reduce prices of goods and services, bringing relief to consumers.

On Wednesday last week, the Zimbabwe Energy Regulatory Authority (Zera) reduced petrol prices by 9 cents to US$1,61 from US$1,70 per litre, while diesel is now selling at US$1,76, down from the previous US$1,80.

The blending ratio has also been reviewed to E20, up from E15. Prof Ncube told Sunday News in Bulawayo yesterday that President Mnangagwa has directed that fuel prices be maintained at affordable prices to ensure stabilisation of the economy.

In March, President Mnangagwa directed Government to consider domestic remedies, including a reduction of duty and surcharges on petroleum products, to control the price of petroleum. He said the drop in fuel prices has also been precipitated by global prices that have gone down by up to 6 cents (US) per litre.

“The fuel price decrease is a reaction to market forces which have seen the global price also lowering by up to 6 cents per litre. The President directive to cut duty on fuel imports is also part of why we have been able to see fuel prices go down,” said Prof Ncube.

He said the  fuel price drop will also assist Government in reducing the rate of inflation as well as stimulate the decrease in prices of basic commodities and services.

Energy and Power Development Permanent Secretary Engineer Gloria Magombo told our Harare Bureau that ordinarily prices of goods and services could start falling in response to the new fuel prices.

“For local fuel prices, it is basically a result of our FOB (free-on-board) structure which we have been tracking closely so that any downward movement in international prices reflects quickly locally. Also, we have raised blending levels to E20, which really played a part in the reduction of prices. So we can say that’s an important Government intervention. We hope that prices of goods and services can respond to this drop in fuel prices as quickly as they do when they go up.”

Crude oil, which is the baseline raw material for most petroleum products, rallied to historic prices this year following the conflict in Eastern Europe, peaking at US$123 per barrel in March, before coming down to around US$100 recently. Business welcomed the reduction in fuel prices, which significantly contribute to operational costs.

Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Mr Christopher Mugaga said falling fuel prices will inject renewed impetus into the economy.

“Everyone knows that the conflict between Russia and Ukraine sent economic tremors not only to Zimbabwe but to the whole world, and we have been witnessing the rise of prices in all basic commodities. It is clear that by the time these countries opened up channels for smooth trading, prices were definitely expected to decline and it is good news to our industry since fuel is the key driver of every economy.”

Confederation of Zimbabwe Industries (CZI) president Mr Kurai Matsheza said retreating fuel prices instill “hope and confidence”.

 “It is a welcome development and as industry we expect to start seeing basic commodities prices going down. We also hope that fuel prices continue to drop.”

Information, Publicity and Broadcasting Services Permanent Secretary Mr Nick Mangwana said the Government will continue implementing measures to cushion citizens.

“We are defying the odds by continuing to drop fuel prices. We should see the effect of this reduction trickling down to goods on the shop shelves,” he wrote on Twitter on Friday.

Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu said the development meant that the price of basic commodities and goods is set to stabilise. 

“Prices of cooking oil, sugar and other necessities have started going down. It is imperative that the Government and business continue engaging towards an improved ease of doing business environment. The structural challenges are being worked on and prices are responding in a very positive way,” he said. 

Grain Millers Association of Zimbabwe spokesperson Mr Andrew Kunambura also lauded the development saying any progressive miller would note this positive development, noting that the grain milling industry was a high fuel consumption one. 

“This is a positive development because as grain millers we use a lot of fuel in our operations, especially in terms of transportation, we are a high fuel consumption industry therefore any decline in fuel costs is a welcome one. This has seen in the easing of operational costs and it is our hope that this decline continues in the coming months. For any progressive miller this is indeed a positive development hence the Government must be commended for this,” said Mr Kunambura. 

Local economist and National University and Science and Technology (Nust) lecturer Mr Stevenson Dlamini said while the reduction in fuel costs might not necessarily lead to a decline in prices, it was going to help slow down the cumulative inflation rate. 

“The country has been impacted negatively by the shock emanating from the Russia – Ukraine conflict. It has, however, started benefiting from the responsive Government initiatives of reducing taxes on fuel which is a key cost driver. This will have the effect of reducing costs in the value chain and most likely slow down inflation growth rate. It will not necessarily lead to a decline in prices but a slowdown in inflation rate. Cumulative inflation is most likely going to slow down,” said Mr Dlamini.-

Additional reporting by Harare Bureau