Fuel price hikes and subsidies: Contradictions

The Energy Regulation Board on October 13, 2016 announced a sharp increase in the retail prices of petroleum products such as petrol, diesel and kerosene by an average of 37 percent

However, glaring inconsistencies government has not been very consistent in giving out any tangible reasons as to why the retail price for fuel – which is the bloodline of the economy has suddenly escalated.

According to government sources, the increment is being attributed to the recent announcement by the Ministry of Finance that government will remove subsidies from many sectors of the economy, in order to hamonise the countries economic status.

However, according to the records on May 2, 2013 , the – then Special assistant to Press and Public Relations for Late President Michael Sata, George Chellah released a press statement saying government has done away with subsidisies in all petroleum products.

This is very contradictory with the current reports that IMF had instructed government to remove all subsidy support to all sectors of our economy.

“LUSAKA, Thursday, May 2, 2013 – His Excellency, Mr. Michael Chilufya Sata, President of the Republic of Zambia, has said the removal of the subsidy on petroleum products will enable the state to have more finances available for spending and guarantee proper implementation of all government programmes and projects,” Chellah said in a press release

“President Sata said it is necessary that the subsidy on petroleum products, which has been a burden on state coffers for a longtime, is removed and consequently the price of fuel adjusted upwards in order to attract wider social benefits for the general populace,”

“The removal of the subsidy will make more finances available for spending and guarantee job creation and the development of infrastructure such as schools, universities, hospitals as well as the Link Zambia 8000 project, which will open up the rural areas for increased trade and investment,” President Sata’s aide said in 2013.

Chellah also said the removal of subsidies on all petroleum products is effective from that particular month.

However after three years, government  has indirectly given the subsidy issue as the reason the fuel prices has been hiked.

And a source has told Zambian Eye that government want to chicken out of the IMF deal, trying to secure a laon from China.

An economist, who spoke to Zambia Eye on condition of anonymity said government needs monetary injection for the economy to survived.

“A second option is for president [Lungu] to look towards China for help. $1 billion would really be pocket change for China given its stock of $3.6 trillion worth of reserves. The trouble with this option is that the money would come without a credible commitment from the government for fiscal consolidation, something that an IMF loan would have guaranteed. In other words, resolving the current crisis requires money but also a commitment from government that the money will be well spent,” he said on condition that his name is not mentioned.

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