PF was warned on fuel subsidies by energy experts!
On 7th December, 2021, Former Rural Electrification Authority (REA) Board Chairperson in PRESIDENT Edgar Chagwa Lungu led Administration Johnson Chikwanda wrote this on Dynamic Analysis Zambia (DAZ) WhatsApp group;
Here was his explanation on the fuel pump prices adjustment..
MC
Last year Government passed a statutory instrument and waived 25% customs duty on fuel.
This was done in order to avoid fuel pump price increase. In January this year, Government further waived VAT@ 16% and Excise Duty on diesel and partially on petrol all to keep the pump prices stable as more pressure mounted to increase them.
So you can see that by January this year, a total of over 41% were waived just to try and contain the pressure and keep them stable.
So the current pump price structure does not have over 41% taxes. Simple calculations indicate that over K9 billion revenue may have been lost due to these tax waivers.
We warned previous government to avoid this path as it will lead to shifting money allocated for service delivery to fuel subsidy and failure to recruit, failure to buy drugs and medicines etc.
New Dawn Government inherited this subsidy structure which am told has blown to over K500m every month.
With crude oil prices continuous going up and a relatively weak kwacha, OMC are landing imported fuel at a loss despite all the tax waivers.
Currently Government is compensating about 3 major OMCs with reimbursement just to avoid complete failure to import fuel in the country but there are alot other OMCs who are not benefiting from this reimbursement thus suffering significant losses.
New Dawn Government is caught between a rock and hard place.
There is no option but to increase the pump prices either in a phased approach or single jump.
Pump prices in SA, Zim, Botswana, Malawi, DRC, Tanzania are now higher than in Zambia. That shows you there is something wrong. Countries with a coast line or nearer to the sea usually have cheaper pump prices.