Zimbabwe could be heading for a fresh inflationary wave after Treasury approved a significant increase in fuel levies, a move expected to push up pump prices and raise costs across the economy.
The adjustment, which took effect on June 2, affects the Strategic Reserve Levy (SRL) on both diesel and petrol and comes at a time when global oil prices are already trending upward due to geopolitical tensions.
According to official documents, the SRL on diesel has been increased from US$0.05 to US$0.12 per litre - a 140% jump. Petrol has also been adjusted upwards, from US$0.413 to US$0.523 per litre.
On Wednesday, diesel was retailing at US$2.09 per litre, while petrol was selling at US$2.08 per litre, already among the highest fuel prices in the region.
The changes were communicated in a directive issued by Secretary for Finance, Economic Development and Investment Promotion George Guvamatanga, who instructed the Zimbabwe Revenue Authority to implement the revised levy structure immediately.
"Treasury has approved the review of the Strategic Reserve Levy (SRL) on fuel in line with the approved retail prices," Guvamatanga said.
He added that the necessary Statutory Instrument would be drafted, while the Zimbabwe Revenue Authority was authorised to implement the changes pending publication of the legal instrument.
Economists warn that the move is likely to ripple through virtually every sector of the economy, given the central role of fuel in transport, production, agriculture, mining and distribution.
Transport operators and logistics companies are expected to be among the first affected, as fuel remains one of their largest operational costs. Increased transport charges are likely to filter through supply chains, raising the cost of goods and services.
Manufacturers, retailers, miners and farmers are also expected to face higher input costs, with diesel playing a key role in production, irrigation and freight movement.
Economist Vince Muswere said the adjustment would have a broad-based inflationary impact.
"Any increase in fuel prices leads to a knock-on effect since fuel is at the centre of all economic activity," he said.
Another economist, Eddie Cross, questioned the policy rationale behind the levy increase, arguing that it functions more like a tax in practice.
"I cannot see any justification for this measure. We do not hold strategic stocks of fuel," he said.
Economist Enock Rukarwa added that Zimbabwe's fuel pricing structure remains heavily influenced by taxes and levies compared to regional benchmarks, contributing to higher pump prices.
He called for a comprehensive review of the fuel tax system to improve competitiveness and reduce costs along the value chain.
For households, the impact is expected to be immediate, with higher fuel prices likely to push up transport costs and food prices as businesses pass on increased expenses.
Economists warn that fuel price increases typically trigger inflationary pressures because they affect nearly every stage of production and distribution, ultimately reducing purchasing power and weakening consumer demand.
The development places policymakers in a difficult position, as efforts to strengthen fiscal revenue and fuel reserve mechanisms risk adding further strain to an economy already sensitive to price increases.
With fuel acting as a key input across all sectors, analysts say the latest levy adjustment could trigger a wider cost-of-living increase in the coming months unless offset by stabilising measures elsewhere in the economy.
- Business Times
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