By Nomalanga Moyo
13 March 2013
Finance Minister Tendai Biti has increased the price of fuel, in a desperate bid to raise money for the upcoming elections.
The price hike was announced on Monday and has already sparked an outcry from Zimbabweans worried about the extra financial burden this will add to their already tight purses.
Through his state of the economy report, Biti said government had increased excise duty on fuel by at least 20 percent, and suppliers have already indicated they will be passing this on to consumers.
Industry players said they will be increasing the price of fuel by 5 cents. Currently, fuel prices are pegged at $1.50 to $1.55 per litre for petrol and $1.38 to $1.40 per litre for diesel.
Most Zimbabweans rely on public transport to make their journeys, and the fuel price increase is set to drive up the cost of other commodities.
“Poor people will not be able to buy fuel for their vehicles. How are the people going to afford, 90% of the people are not working,” a pensioner told a daily newspaper.
Commuter transport operators who spoke to the press said the increase would eat into their profits, and cited the demands for bribes by traffic police and council officials as an added burden.
Quoting the Consumer Council of Zimbabwe’s February report, the Daily News wrote that persistent fuel price hikes have led to an increase in the cost of living from $560 to $570, based on an urban family of six.
Economic analyst Tony Hawkins said the price hike is likely to raise Zimbabwe’s inflation, which is currently at 3%, by at least two percentage points.
Hawkins said the announcement wasn’t surprising considering that government revenue is under pressure, with expenditure rising particularly ahead of elections.
He said he does not believe the hike was necessitated by just the need to raise money for the polls but because revenue is generally low and government had to do something.
“There was not much Biti could do as we are already quite a high tax country, be it personal income tax, sales tax or company tax.
“So government had to look at easy and relatively inexpensive ways of raising money and the fuel tax is one of those,” Hawkins added.
Bekithemba Mhlanga, also an economic analyst, agreed that Biti’s announcement will certainly raise inflation, although not by much.
Biti said although government has been able to raise funding for the immediate needs of the referendum to the tune of $31.5 million, allowances for polling agents are yet to be guaranteed.
On Monday, the government indicated that it had raised $40 million by selling a “voluntary bond” to Old Mutual Plc’s local unit and NSSA for Saturday’s referendum.
The government has also indicated that it will be re-engaging the international community through the United Nations Development Programme to help fund the general elections.
Biti said government increased excise duty on fuel because Zimbabwe had the cheapest prices in southern Africa, adding that “it has also been unavoidable that government seeks recourse from the ordinary taxpayer.”