Zimbabwe fights fuel crisis

The Zimbabwean government has taken measures to increase its fuel supplies amid a sudden price hiking caused by shortage which threatens to cripple all sectors of the economy, particularly industry and commerce.

On Tuesday, the central bank Reserve Bank of Zimbabwe (RBZ) unveiled a 50-million-US-dollar revolving fuel import facility by signing an agreement with local commercial banks and institutions, namely, the French bank BNP Paribas and the co-arranger of the facility, Loita Capital Partners International.

The facility will see the National Oil Company of Zimbabwe initially importing fuel for both the public and the private sectors for the next 12 months. And it will be renewed depending on the ability of the central bank to maintain it.

Private dealers have raised the price of fuel to about 300,000 Zimbabwean dollars (approximately 2.97 U.S. dollars) a liter, apparently in response to a shortage that has resurfaced over the past week.

The suppliers, who provide most of the country's fuel needs, had been selling petrol and diesel both at about 190,000 Zimbabwean dollars a liter before the sudden increase.

Experts here held that the sudden price hiking will further fuel inflation, currently at an all-time high of 1,042.9 percent.

Nickel producer, Bindura Nickel Company, will leverage its exports to service the facility as part of the deal while local banks, the Stanbic Bank and the Commercial Bank of Zimbabwe (CBZ), are also parts of the deal.

RBZ governor Gideon Gono said the deal is within the context of the National Economic Development Priority Program that will leave no stone unturned in addressing the current challenges facing the economy and form partnerships to finance procurement of fuel.

But observers noted that the new prices were being illegally quoted against the prevailing parallel exchange rate of the local currency to the U.S. dollar. Sources here said the exchange rates at the paralleled market are around 260,000 Zimbabwean dollars to one U.S. dollar.

The government also blames the shortage and artificial prices on "fuel corruption." Monetary authorities concede that "fuel corruption" is rife and have called for specially-made interventions to rid the sector of price distortions and illegal dealing.

"We are ready to enter into some arrangements where tailor-made interventions are put in place to cushion, on a targeted basis, the vulnerable groups, to allow for the realignment and liberalization of fuel prices," Gideon Gono said.

Continued hikes in the prices of basic commodities, among other crucial services, as well as the recent 200 percent increase in salaries for the public service have been cited as factors that might further fuel inflation.

Zimbabwe has been facing fuel shortages for the past six years, a situation that has affected all sectors of the economy. The country requires at least 40 million U.S. dollars a month to meet its fuel needs.

Source: Xinhua