A massive hike of 240 per cent in the prices of petrol and diesel goes into effect today in Zimbabwe, as President Emmerson Mnangagwa announced the increases on Saturday night.
Petrol was selling for 1.32 dollars (N481) per litre before Sunday’s hike. Now, it will be sold at $3.31 per litre. He said the prices were predicated on the prevailing rate of 1:1 between the U.S. dollar and the surrogate bond note.
Mnangagwa revealed the increases to journalists at the State House ahead of his tour of Eastern Europe and Switzerland. He said:
“Following the current shortfall in the fuel market, we have chosen to act, and act decisively. The shortage,
attributable to increased fuel usage in the growing economy, and compounded by rampant illegal currency and fuel trading activities, is unsustainable and Government has today decided on the following measures:
1) A fuel pump price set at $3.11 per litre for diesel, and $3.33 per litre for petrol.
2) We will grant a rebate to all registered business entities in Manufacturing, Mining, Commerce, Agriculture and Transport sectors, to be decided at a later date.
3) Enhance the export incentive scheme by an additional 2.5%
4) Implement immediate measures to ensure constant fuel supply into the country for sustainable fuel availability
5) Put in place a package of measures to cushion Government workers, until a full review of Cost-of-living
Adjustment package due in April is effected (in the context of the current budget)
6) Begin a comprehensive audit of all fuel draw-downs to establish all misuse of fuel including politically
motivated and criminal conduct.
As the new Zimbabwe continues to progress, both economically and diplomatically, we must stay on track and keep on moving forward. Tomorrow, I will embark on a five-nation visit to continue this journey. My visit will focus on bilateral economic engagement, especially in the areas of mining, technology, agriculture, energy and human capital development.
In Switzerland, I shall be attending the Davos World Economic Forum, where I will be meeting with world leaders and business executives.
I shall be consolidating and reaffirming our crucial message that “Zimbabwe is Open for Business” with
“Dialogue” paramount in the context of our policy of engaging and re-engaging the world.
For Zimbabwe to recover, we cannot go it alone. The new Zimbabwe is moving forward, but unlike in the past, now we must move forward with friends and partners from all around the world by our side” Mnangagwa said.
The fuel price increases coincided with government’s decision that the country will have its own currency within 12 months, thus jettisoning the US dollar.
Zimbabwean Finance and Economic Development Minister Mthuli Ncube said adopting the U.S. dollar or the South African rand would not solve the country’s macro-economic problems.
Asked to give a timeline on when local currency would be reintroduced, Ncube said it would be done “in less than 12 months.”
He said separating the parity between Real Time Gross Settlement accounts (RTGS) and foreign currency accounts (FCA) was the beginning of currency reforms which are necessary for pushing the country’s economy in the right direction.
“Our job is to introduce a currency that will be stable and less volatile. Dealing with the fiscal side is the first order to move towards a stable currency,” Ncube said.
Zimbabwe adopted the use of multi-currencies in 2009 after its local currency had been rendered worthless by hyperinflation.
To relieve cash shortages, the Reserve Bank of Zimbabwe introduced the bond note in late 2016.
Initially pegged at 1:1 against the U.S. dollar when it was introduced, the bond note, however, has gradually lost value against the real currency and is now trading at about one-third the value of the U.S. dollar.