(Bloomberg) -- Zimbabwe boosted gasoline prices by 46% even as it said it will subsidize public transport and cut fuel duties by more than half to try and ease the impact on its poorest citizens.
The price of a liter of gasoline was increased to 4.97 RTGS dollars, a quasi-currency that isn’t used outside Zimbabwe, according to a government regulator. That’s equivalent to about $1.42 at the interbank exchange rate. The increase came after the government forced fuel importers to buy dollars on the interbank market rather than at a preferential 1:1 rate from the central bank. The move is a bid to end crippling fuel shortages as the government cannot afford to fund the purchase of adequate supplies.
The government will spend about $8 million a month subsidizing bus fares, George Guvamatanga, permanent secretary in the Finance Ministry, said Monday. “A quantified, budgeted and targeted subsidy is a good subsidy,” he said. The fuel-price increase, which was yet to be announced when Guvamatanga commented, would have been even higher had the duties not been reduced, he said.
In January the government more than doubled the price of fuel overnight, sparking the worst riots since the mid-1990s. At least 17 people were killed by security forces who quelled the protests, according to human rights groups. The increase came in the midst of shortages of goods ranging from fuel to medicine and as inflation accelerated to the highest rate in 11 years.
The Zimbabwe Congress of Trade Unions, the group that organized the January protests, said its leaders will meet on Thursday to decide how to respond.
“Since the price of fuel is linked to the interbank rate, and the RTGS$ continues to fall against the dollar, does this mean that there will be price increases weekly,” said Japhet Moyo, the ZCTU’s secretary general, in an interview. “This will have a bearing on prices of other goods.”
The change in arrangements for fuel importers was introduced as the central bank and finance ministry injected $500 million to improve the liquidity of the foreign-exchange interbank market.
(Adds labor union response in fifth and sixth paragraphs.)
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