Mthuli Ncube sends mixed signals on fuel

FINANCE minister Mthuli Ncube this week sent mixed signals over the country's neo-liberal policy on fuel subsidy as policy inconsistency remains one of the major sources of concern for investors.

Zimbabwe is ranked 140 among 190 economies in the ease of doing business, according to the latest 2020 World Bank annual ratings. Despite improving between 2017 and 2019, critics cite bureaucratic inertia, political interference and policy inconsistency among the factors unnerving prospective investors.

During his presentation to delegates attending the Dubai Expo, Ncube cited the scrapping of fuel subsidies as one of the key economic reforms Harare had adopted as it seeks to normalise relations with multilateral creditors such as the World Bank, International Monetary Fund and the African Development Bank. The Dubai Expo is a global event that links innovation, technology, art and culture to offer a great experience. Different countries from around the world exhibit at the expo, showcasing products, services and new ideas.

"Ease of Doing Business Reforms are part of broad measures on enhancing the country's investment environment and external competitiveness," Ncube said.

Zimbabwe, battling to extricate itself from a huge debt overhang, has undertaken to adopt a raft of political and neo-liberal economic reforms. Critics however doubt the government's political will in building a democratic state which upholds civil liberties.

On economic reforms undertaken to date, he cited:  the re-introduction of local currency, introduction of the central bank's forex auction, removal of fuel and electricity subsidies, operationalising the Zimbabwe Investment Development Agency, implementation of Special Economic Zones and fiscal consolidation.

However, while addressing a virtual news conference on the same day he made the presentation, Ncube told local journalists that government had over the past five months been subsidising the commodity to cushion consumers from inflation. The subsidy, which according to Ncube came into effect around October last year, was introduced before global oil prices spiked after being triggered by Russia's invasion of Ukraine last month.

"We are not rushing to revise inflation figures and growth but we continue to watch and act appropriately in terms of our subsidy programme we have been running by controlling or changing the fuel levies," Ncube said.

"We have actually been running the fuel subsidies for a while…actually for the last five months. We have not publicly announced that that is what we have been doing. The way we have done it is by reducing the fuel levy from basically US12.11cents per litre to 8.74 cents per litre. So we have been playing around with that just to make sure that we lower the surge in the fuel price. So if you notice, since about October last year the prices have been reasonably stable or rather not rising as fast as expected. It is because we have been running this subsidy programme."

Oil prices last week reached 13-year record highs amid concerns that the surge will be inflationary across the globe. At over 50% annual inflation as at December, Zimbabwe had the highest inflation figures in the region but the authorities remain optimistic that the rate will slow down by year-end.

In 2019, a sharp rises in fuel prices on the domestic economy triggered mass protests which resulted in the government unleashing a brutal crackdown which was widely condemned by the international community.