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Government raised duty on fuel by 20 percent from US0,20c to US0,25c on diesel and by 25 percent from US0,25c to US0,30c on petrol as its seeks to raise part of the money needed for the referendum expected this Saturday and elections in July this year. Some fuel stations are now selling petrol at US$1,61 from US$1,54 per litre and diesel at US$1,39 up from US$1,34 per litre. Others dealers have not changed prices.
Economists said the increase in duty on fuel was likely to have a negative impact on inflation especially if suppliers pass on the increase on costs to consumers.
“The increase in duties and subsequent rise in fuel prices is likely to have second and third order effects on overall prices,” research firm Invictus Securities said.
“Over the last three years, Zimbabwe has maintained a stable inflationary environment with inflation averaging 3 percent. Following the increase in duties we expect inflation to rise marginally from 2,5 percent in January to 3 percent by June.”
The research firm said while the impact on inflation was expected to be marginal, the impact on the consumer, especially at the lower end of the market would be significant.
“Transportation costs account for around 10 percent of disposable income (for low income groups) and any increase in the price of fuel is likely to have a significant impact on the consumer,” said Invictus.
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Finance Minister Tendai Biti has maintained that the country would still meet its inflation targets.
The economy continues to maintain a stable general prices level, benefiting from the depreciation of the rand against the US dollar and depressed demand due to tight liquidity. Consequently, annual inflation for the month of January 2013 declined to 2,51 percent from 2,91 percent in December 2012.
Similarly, month on month inflation stood at 0,07 percent against 0,13 percent recorded in the previous month. At 2,5 percent annual rate for
January, annual inflation is still below the regional benchmark level of 5 percent.
Another economist, Mr Witness Chinyama said local manufacturers and retailers were unlikely to absorb the costs.
“Transporters are likely to lead in revising fares upwards since they did not increase fares when fuel went up a few weeks ago. I believe they will be left with no option but to pass the burden to commuters. This would then have a ripple effect on other sectors as transport is key in all businesses,” he said.
Consumer Council of Zimbabwe executive director, Ms Rosemary Siyachitema said it was unfortunate that the authorities did not consider the impact of duty increases.
“This means prices of all other basic goods will go up. The responsible authorities should have acknowledged the status of consumers and how the duty on fuel would impact on their lives,” she said in an interview yesterday.
Economist, Mr Gift Mugano said the duty hike would affect price levels across the value chain. “There is an immediate effect which you will see at the filling stations and a feedback effect which comes from the value chain,” said Mr Mugano.
Mr Brains Muchemwa of Oxlink Capital said: “The inflation impact of the recent hike in duty on fuel will be very minimal because transport constitutes only 9,75 percent of the inflation basket and this increase will, if fully passed on to consumers, will result in very marginal increases in inflation.
“Equally important is to examine the potential pass-through effect of this increase into the wider production and distribution components of the economy and considering that the nominal increases in duty are around only 4 percent per litre, the fears of an inflation spike are minimal.”
Despite the increase, Zimbabwean motorists will still enjoy the lowest prices in the region. Last month, South Africa raised petrol prices to average record levels of R13,08 per litre for petrol and R11,92 per litre for diesel.
Online Reporter