Fuel prices up as ZERA admits arbitrage is a big worry

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HARARE – The Zimbabwe Energy Regulatory Authority has hiked the price of fuel, although it remains below US$1, after admitting that pricing could not follow the parallel market rates as it would heighten inflationary pressures.

In a notice, ZERA increased the price of petrol by 37.9% to $28.96 per litre and the price of diesel by 19.63% to $24.93 per litre after an increase in free on board and dealer margin fees.

The increase comes as ZERA CEO Edington Mazambani said that pricing of fuel in the current environment was a delicate balancing act. “It would be easy to peg the price of fuel to the parallel rate but this would have a huge inflationary effect on the economy.”

RBZ Governor John Mangudya said it would be easy to price all fuel in forex as that would also remove arbitrage but the reason why there was low demand on DFI fuel was because people can’t afford it.  He said in any case it was impossible for a country to completely trade in forex. “Since 2009, Zimbabwe was never fully dollarised. We had a 100% dollarised economy in pricing but the structure itself was not dollarised as electronic dollars were created on the RTGS platform until 2018. It’s not possible to have a dollarised economy even though as long as there is an exchange rate there will always be an opportunity for arbitrage.”

Mazambani said the biggest concern was the arbitrage opportunities currently existing because of the exchange rate and the lack of a licencing framework for players within the sector who are selling fuel in foreign currency. “The worrying situation is where players who are selling in foreign currency, access fuel, which has been structured through the RBZ and payable in RTGS.”  He said this is not only unjust enrichment from the fuel players, but it also prejudiced the State of fuel duty in foreign currency.

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