Fuel hike will lead to further economic decline

The latest fuel price hikes in Zimbabwe will badly affect consumers and companies already struggling to keep their heads above water, warned local economist John Robertson. Robertson told IRIN that the fuel price increase had come at a time when inflation had climbed to 228 percent and the country was experiencing power cuts. Zimbabwe is suffering a serious foreign currency shortage, which has in turn translated into serious fuel and electricity shortages. These have combined to raise inflation and production costs. The official The Herald newspaper reported that the pump price of petrol "went up to Zim $450 [about US 55 cents at the de facto rate of exchange] per litre and diesel rose to Zim $200 [US 24 cents] per litre with effect from midnight" on Tuesday. It quoted the minister of energy and power development, Amos Midzi, as saying that "it will take a while for the impact of the increases to be felt. But with these prices, I expect that with good management and efficiency, Noczim [the state petroleum supplier] should be able to improve the supply situation of fuel". According to The Herald, Midzi said inflationary pressures had pushed up fuel pipeline costs, such as transportation and storage, resulting in Noczim selling fuel products at below procurement costs. However, Robertson said the impact of the fuel price hikes, when fuel was already in very short supply, would have a disastrous impact on the economy and the lives of ordinary Zimbabweans. "Everybody will be affected. We will be in a very serious predicament in terms of moving production goods, getting food delivered and moving coal, timber and heavy commodities to the factories. So, we will have a very serious shrinkage in the volume of business being done. "Coupled with this is the fact that we're now experiencing power cuts because South Africa's [power parastatal] Eskom is getting very serious about being paid, we owe them so much money [and lack the foreign currency to pay the debt]," Robertson said. He added that because of the energy crisis in Zimbabwe "we expect to see worsening shortages of consumer goods in the shops and shortages of export goods". This would further aggravate the foreign currency shortage in the country. The economic problems could not be fixed without solving the political problems besetting the country, Robertson noted. The opposition Movement for Democratic Change (MDC) said the latest fuel price increase was a 209.9 percent rise "just two months after a previous hike of 95 percent". "In real terms this increase means that for those vehicles which have 60 litre tanks the cost of fuel rises from Zim $8,520 to Zim $27,000. This is way above the net salary of a majority of ordinary Zimbabweans. Members of parliament earn an average net salary of Zim $60,000," the MDC said in a statement. "This astronomical increase means that MPs can only afford two tanks of fuel each month and nothing else. No food, no clothing and no rentals. It means that a trip to [the second city] Bulawayo by car will now cost well over Zim $60,000," the MDC added. The party added that those who travel by bus were likely to pay Zim $15,000 (about US $280) one-way, "well beyond the net salaries of ordinary Zimbabweans".