Government allows private imports of fuel

Higher inflation and fuel price hikes would follow the weekend announcement that the petroleum sector could import its own fuel, instead of being forced to buy from the parastatal National Oil Company of Zimbabwe (Noczim), economists have warned. This followed reports that the government was struggling to raise the foreign currency needed to pay for supplies. President Robert Mugabe told a National Consultative Forum's annual retreat last week that cabinet had "cracked" its head over fuel supplies every week. Instead, foreign companies could use their own resources to import petrol and diesel, the state-controlled Herald newspaper reported. "Twenty-two years in government, 22 years of playing this foolery. They [companies] don't suffer from the headaches and stomach aches I suffer from," Mugabe was quoted as saying of the government's attempts at sourcing fuel. Economist John Robertson told IRIN that if multinationals used the parallel market to source foreign currency for their own supplies, this could push up the price of fuel significantly. "The price of anything that needs to be transported around the country will rise and food deliveries will become less efficient. The food crisis will become worse," Robertson warned. He said that past week's attempt by the government to raise sufficient foreign currency from the parallel market - because it didn't have enough in its own coffers to pay Noczim and South African electricity supplier Eskom - was believed to be behind the latest surge in the parallel exchange rate. The official government rate is Z $55 to US $1 but due to currency shortages the parallel rate has shot from Z $500 for US $1, to the current Z $1,400. He said the anticipated increase had already set off a fuel shortage through the dual reaction of people scrambling to fill up and fuel companies hoarding ahead of the anticipated price increases. "It would make no economic sense for owners to sell their current stocks at the lower price because they would have to replace stocks at the higher price and wouldn't get a higher bank loan on the basis of a price increase," he said. In a statement, the opposition Movement for Democratic Change (MDC) said: "The private sector has been calling for this [private imports] to be allowed and has given assurances that it will work with the state to overcome current shortages and disruptions in supply as well as ensuring that pump prices do not escalate unreasonably. They have given undertakings that they will work within an open and transparent system." However, the MDC cautioned that: "To simply expect the oil majors to buy foreign exchange from the market as other importers do at present would be a non-starter. Exchange rates are so volatile at present and the shortage of foreign exchange in open markets so great, that prices would have to rise 10-fold to reflect the costs involved." The party proposed an agreed rate of exchange for the private sector importers, but the government's own foreign currency shortages would make this difficult. The statement concluded that "it must be noted that if the private sector took over the procurement and delivery of fuel to Zimbabwe there would be a saving over present costs of over US $100 million per annum". One of the reasons was that the present high premiums being paid by the state to current suppliers would fall away. Robertson believed that the solution lay in the Zimbabwe government and the International Monetary Fund (IMF) "making up" and resuming their working relationship so the government could borrow "a few billion" and build up the country's foreign currency reserves again. Local newspaper The Daily News reported that IMF Resident Representative for Zimbabwe Jerry Johnson had warned that the country was on the brink of an economic crisis and that the inflation rate could go beyond the 500 percent mark. Inflation for September was 137 percent.