HARARE – Zimbabwe, facing acute fuel shortages, has liberalized the fuel industry through allowing petroleum traders to procure the commodity through an interbank market which the central bank says it is supporting with a US$500 million (R7.2 billion) funding chest.
Zimbabwe has until now been heavily subsidising fuel despite battling forex shortages. Fuel traders were getting forex allocations to import fuel into the country while they were only allowed to sell at a controlled price and in local currency.
But starting on Tuesday, the fuel marketers have to use the interbank market to source forex for fuel importation, said Reserve Bank of Zimbabwe governor, John Mangudya.
Economists and market watchers said this effectively meant liberalisation of the fuel industry and would also result in a fuel price increase as market forces kick in.
“With effect from 21 May 2019, the procurement of fuel by the Oil Marketing Companies shall be done through the interbank foreign exchange market,” the Zimbabwean central bank governor said in a notice on Monday.
He also emphasised that the previous arrangement where petroleum marketers were getting forex from the Reserve Bank of Zimbabwe had fallen away. “This means that the 1:1 exchange rate that was being used by the oil marketing companies for the procurement of fuel will be discontinued with immediate effect.”
Zimbabwe said it had made a drawdown of as much as US$500m “from an offshore line of credit” to breathe liquidity into the interbank market. Zimbabwe also requires that export companies such as South African pgm groups – Anglo American Platinum, Impala Platinum and Sibanye – surrender 50 percent of their forex earnings to the reserve bank.
Zimbabwe has continued to struggle to avail crucial services and commodities as the country’s financial sector wobbles. The economic crisis besetting Zimbabwe has been worsened by limited foreign direct investment inflows.
The mineral rich but struggling southern African country hiked the price of fuel earlier this year, sparking protests that left a trail of destruction. However, Finance Minister, Mthuli Ncube said in parliament last week that fuel consumption has been on the decline.
He said Zimbabwe had imported about US$138.7m diesel for the first two months of 2019 compared with US$224m for the same period in 2018. Petrol valued at US$74.3m had also been imported for the months of January and February this year compared with US$105m in November and December last year.