Zimbabwe's strategic fuel reserve levy faces fresh scrutiny

THE government's management of Zimbabwe's strategic fuel reserve levy came under renewed scrutiny in Parliament after legislators questioned why the country continues to cushion fuel price increases through tax adjustments despite collecting the levy for years.

The debate centred on the size, management and utilisation of funds raised through the strategic fuel reserve levy, with opposition lawmakers demanding greater transparency over whether the money has been used for its intended purpose.

The matter arose after Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube outlined measures taken by Government to shield motorists and businesses from rising international oil prices by reducing fuel taxes and levies to keep pump prices below US$2 per litre.

His remarks prompted opposition MP Edwin Mushoriwa to question why Government still had to respond to global fuel price shocks if Zimbabwe had been collecting a strategic fuel reserve levy for many years.

"Could you advise this House that when it comes to fuel, we have been imposing strategic reserve taxes all these years? Why should we be in shock when we have millions of dollars that we have paid for a strategic reserve? Where are our strategic reserves that were supposed to cushion us at a time like this? What happened to that money?" Mushoriwa asked.

Responding, Prof Ncube said a strategic fuel reserve does not necessarily have to exist in the form of physical fuel stored in depots.

Instead, he said Government had opted to maintain the reserve in the form of cash, arguing that storing fuel carries significant storage and maintenance costs.

"There are two ways in which a strategic reserve is managed. You either manage it in the form of cash or you manage it in the form of physical goods or commodities stored somewhere," Prof Ncube said.

"When you store it somewhere, you also incur storage costs. There is a cost associated with that. So, we decided to use the former approach, which is that the reserve is in the form of cash, whose equivalent is in the form of taxes. We adjust whenever it is needed in order to cushion the increase in prices for citizens."

The minister said Government effectively deploys the value of the reserve by reducing fuel taxes and levies whenever international oil prices rise sharply, thereby limiting the impact on consumers.

"In a way, what we are doing is we are using the taxes that are collected from these levies to cushion citizens and the effect is the same," he said.

Prof Ncube argued that the strategy had enabled Zimbabwe to avoid the fuel shortages and long queues experienced by some countries in the region during periods of global oil price volatility.

"This is why we have not seen any fuel queues when you look at the impact so far on Zimbabwe. Yes, we have had price increases. If you look around the region, you have seen fuel queues and you have seen challenges. We are not having those challenges because we have managed things well," he said.

Mushoriwa, however, maintained that the minister had not answered the central question regarding the accumulated funds collected through the levy.

"The Minister did not even answer my question. The question is, we have been displaying a strategic reserve tax over the years and if the Minister is saying that we are keeping the money in cash, where is the money?" he asked.

The Temporary Speaker ruled that the minister had sufficiently explained Government's position, stating that the funds were being utilised through tax and levy adjustments to cushion consumers rather than being maintained as a separate physical fuel reserve.

The exchange highlighted continuing concerns among legislators over transparency and accountability in the management of dedicated public levies, particularly regarding how funds collected for specific purposes are accounted for and deployed.