FUEL REDUCTION AND FUEL TAXES- Ukutengela Amafina Mu Cilonda
By Amb. Emmanuel Mwamba
Before we celebrate the fuel reduction announced by the Energy Regulation Board (ERB), let us remember that to avert an imminent sharp rise in fuel pump prices, Government on 11th January issued Statutory Instrument No.2 of 2002 to continue to waive or suspend the collection of taxes on petroleum products.
The extension for the waiver is valid up-to June 30th 2022.
The taxes suspended or waived on petroleum products are; customs duty (25%), VAT 16% and Excise Duty.
In December 2021, Government announced that the Treasury loses about $41.4 million per month by foregoing the collection of these taxes.
Government also spends another $26million on price differential on world oil market prices and on the exchange rate fluctuations.
Further Government absorbs the cost of applying uniform pump prices across the country.
This amounts to a loss to the Treasury of about $807 million per year since 2020.
Following a Staff-Level Agreement with the International Monetary Fund (IMF) obtained with Zambia, Government announced that it would remove all poorly targeted subsidies including those on fuel and electricity.
Zambia committed to implement bold and ambitious economic reforms before the Agreement is tabled to the IMF Board for approval in June 2022.
On its part, the IMF expects Zambia to shift its spending, away from inefficient public investment and poorly targeted subsidies, towards greater investment in health and education and the delivery of more social benefits.
UKUTENGELA AMAFINA MUCILONDA
Although the Energy Regulation Board has introduced a monthly review of pump prices and has now reduced the cost of fuel from;
Petrol-K21.16 per litre to K19.84 per litre,
And
Diesel- from K20.15 to K18.93 per litre, the concerns of both the Treasury and the IMF on the waiver or non-collection of taxes, remains high.
Therefore the current fuel prices are not in any way cost-reflective until the above taxes are factored in or restored.
As for now, the consumer will continue to enjoy or suffer these small adjustments, in this case a temporal but marginal relief until next month. But the real reckoning will be June 30th 2022.
We say; “Ukutengela ama fina mu cilonda” (When the boil is not drained of its pus,it causes a worse septic wound that may require surgery).