Page 4 - AfrOil Week 04 2021

AfrOil COMMENTARY AfrOil

’s only oil refinery (Photo: IDC)
The Indeni plant is Zambia’s only oil refinery (Photo: IDC)
The Indeni plant is Zambia
Heavily indebted Zambia slashes

fuel tax to ease shortages

Instead of jacking up regulated prices, Zambia is putting further strain on its
finances by giving tax breaks to marketers to encourage them to import more

ZAMBIA has slashed import duties on fuels, quarters. At the start of the year it also scrapped
in a desperate effort to get marketers to bring VAT on fuel imports.
WHAT: more supplies into the country and ease wors- “This [policy] is with a view to adjusting
Zambia’s government has ening shortages. But the move will put further downwards the cost of importing products so
slashed import duties financial strain on the heavily indebted country that they become cheaper,” Energy Permanent
on fuels, after importers and could hinder discussions with the IMF for Secretary Trevor Luanda told reporters. He
complained of losses a bailout deal. added that marketers had complained that the
because of low regulated The country became the first African nation removal of VAT alone was not enough to make
fuel prices in the country.
to default on its debts last November, and the fuel imports profitable.
government is currently in talks with the IMF
WHY: and creditors to restructure $12bn of external A dire fiscal position
Lusaka is trying to allevi-
ate fuel shortages, made debt before August’s presidential election. But These moves will further sap Zambia’s financial
worse by a collapse in authorities in Lusaka, seeking to retain power, incomings, however, and jeopardise negotia-
the value of its currency have also resisted calls to raise regulated fuel tions with the International Monetary Fund
and the closure of the prices. These prices have not changed since (IMF). The Washington-based lender strongly
country’s only refinery. December 2019, despite Zambia’s currency opposes subsidies and is calling on Zambia to
shedding over a third of its value against the US enact austerity measures. It has yet to respond
WHAT NEXT: dollar over the last year. publicly to the latest tax breaks.
By reducing taxes and Fuel marketers say the low regulated pump “The dire fiscal position suggests that the
maintaining fuel subsi- prices mean they cannot afford to import sup- zero-rating may be a pre-election ploy, prone to
dies, Zambia will further plies, given the disparity with international reversal as government funding lines run dry,”
weaken its financial prices, especially in light of the currency’s weak- Irmgard Erasmus, senior financial economist at
position and jeopardise a ening. Rather than jack up prices, though, the NKC African Economists in South Africa, said
bailout deal with the IMF. government has axed the import duty on diesel of the decision by Zambia’s ruling Patriotic Front
completely and cut the gasoline duty by three Party.

P4 www. NEWSBASE .com Week 04 27•January•2021