FUEL PRICE CUTS: RELIEF OR RHETORIC IN ZAMBIA’s ENERGY CRISIS?

FUEL PRICE CUTS: RELIEF OR RHETORIC IN ZAMBIA’s ENERGY CRISIS?

…the deeper problems plaguing the country’s energy sector will not be solved by marginal price reductions alone says Experts

Lusaka… Friday May 2, 2025 – The Energy Regulation Board’s recent announcement slashing fuel prices by nearly 9% across the board has been met with cautious optimism—and sharp questions.

President Hakainde Hichilema was quick to declare the cuts a turning point for Zambia’s economy.

But experts and stakeholders warn that the deeper problems plaguing the country’s energy sector will not be solved by marginal price reductions alone.

According to the ERB, petrol prices dropped by 8.12%, diesel by 9.43%, kerosene by 9.07%, and Jet A-1 fuel by 9.44% for the month of May.

These reductions, the board explained, are linked to a global slump in oil prices and a slight appreciation of the kwacha—from K28.27 to K28.25 against the US dollar.

The UPND government has since framed the cuts as evidence of economic recovery.

However, analysts argue the announcement is more of a delayed policy correction than a breakthrough for an economy that’s been reeling from persistent power outages, procurement scandals, and high living costs.

“If this is the plan to reboot the economy, then it’s a short-term patch for a long-term wound,” said Hon. Sensio Banda, former Member of Parliament for Kasenengwa. “You cannot have four years of high prices, opaque fuel deals like Agrofuel, and then expect an 8% cut to undo the damage.”

The Agrofuel Question

Industry insiders have long questioned the cost structure of Zambia’s fuel procurement system, especially the controversial single-sourced deal with Agrofuel.

Critics say this deal contributed to inflated pump prices over the past few years, at a time when other regional economies were passing on lower global oil prices to consumers.

In that context, April’s reductions raise uncomfortable questions. Were Zambians overpaying all along?

“What we’re seeing now is not a gift to the people,” one energy sector economist told Smart Eagles under anonymity. “It’s a correction of pricing inefficiencies that should never have existed in the first place.”

Energy Woes Beyond Fuel

Despite the price cuts, load shedding remains rampant. Industrial and domestic users continue to face unpredictable power schedules, undermining productivity across sectors—from agriculture to mining and manufacturing.

“Fuel is only one part of the problem,” Hon. Banda argued. “We’re still dealing with erratic electricity supply. Businesses are burning diesel to stay open. So even if diesel is cheaper, they’re still absorbing massive costs due to energy insecurity.”

Moreover, economic recovery faces broader headwinds. Zambia’s debt situation continues to constrain fiscal space. At the same time, the Bank of Zambia has maintained a tight monetary policy stance to rein in inflation—further restricting credit to small and medium enterprises.

The Limits of Optimism

While fuel price reductions could offer limited relief—such as lower transport costs, cheaper production for diesel-dependent firms, and potential easing of food prices—these benefits may take time to reach consumers, and might not reverse the cumulative effects of prior years.

In fact, the Bank of Zambia’s own projections suggest that inflation could drop by just 1-2 percentage points by year-end, even if global oil prices continue to fall. The World Bank forecasts Zambia’s GDP growth at 3.7% for 2025—a sign of resilience, but hardly a surge.

Looking Ahead

What’s clear is that without structural reforms—particularly in procurement transparency, electricity generation, and fiscal discipline—fuel price cuts will remain cosmetic.

“If the government wants real change,” said Hon Banda, “it must tackle corruption in fuel deals, stabilize electricity supply, and stop using propaganda to mask economic underperformance.”