Govt increases fuel excise duty by 25%

Government has increased excise duty on fuel with 25% with effect from last Saturday.

This is likely to push fuel prices up by at least US5cents per litre.

The increase in the excise duty is a deliberate move by government to raise their coffers by burdening the tax payer but this is likely to push costs of most products on the market upwards.

Briefing the media in the capital, Finance Minister Tendai Biti said the increase will see all fuels going up with petrol surging to US30 cents per litre from US25 cents while diesel will be pegged at US25 cents from US20 cents per litre.

"Government seeks recourse from the ordinary taxpayer, hence excise duty on diesel and petrol is being reviewed upwards for the period March-December 2013. This would translate to an increase of 20 % and 25% in excise duties on diesel and petrol respectively," said Biti.

On the financial services sector, Minister Biti said financial institutions should comply with the recommendations agreed by the Reserve Bank of Zimbabwe and the Bankers Association of Zimbabwe.

"RBZ and BAZ signed a memorandum of understanding (MoU) which provides guidelines for determination of interest rate margins and bank charges. The MoU took effect on the 1st of February 2013.We hear a number of banks have complied though some are yet to comply but when there is gross indiscipline we are likely to transform to the agreement into a statutory instrument," he added.

The increase in excise duty on fuel follows the same trend by South Africa.

While analysts believe the increase of duty on fuel will mean more revenue to government, it is also believed it will trigger price increases from across the value-chain.