Fuelling a crisis
Zimbabwe has entered day three of a national shutdown, after government announced a more than 100 percent increase per litre in fuel prices over the weekend.
The petrol price skyrocketed from $1.24 to $3.11 and diesel up to $3.11 from $1.36, making the country’s fuel prices the most expensive in the world.
The country has responded with violent protests, several people have been injured and killed, resulting in a government ordered internet blackout.
The government claims the price hikes are necessary to reduce shortages caused by illegal trading. Oil is one of Zimbabwe’s biggest annual import items – in 2017 it accounted for nearly 8 percent of all imports.
As the economy expanded in 2018 – from 0.6 percent growth to 2.9 percent – the demand for fuel increased, putting a squeeze on central bank reserves. In the first four months of 2018, reserve spending on fuel imports was nearly 25 percent above the $383 million it had allocated. Consumers are paying the price.
It was the latest move in a series of financial bombardments. Most ordinary Zimbabweans live precariously day-to-day due to low wages and high prices for imported goods. Access to cash is scarce, with strict controls on daily withdrawals. Government backed bond notes – so-called “bollars” – have been devalued by as much as 300 percent in shops and stores, despite their official valuation at 1:1 against the US dollar.