Economists Urge The Government Tor Remove Fuel Subsidies
Economists have urged the government to remove fuel subsidies to ensure economic stability, The Zimbabwe Independent reports. Fuel remains subsidised in Zimbabwe as it is selling for less than a dollar with diesel selling at ZWL $21.52 and petrol selling at ZWL $21.77
Economist Clemence Machadu speaking to the publication said although the fuel which is sold in ZWL is beyond the reach of many motorists, the fact that some who have access to the USD are changing on the parallel market and creating a huge demand for fuel.
Said Machadu:
The pricing regime poses two challenges in terms of fostering sustainable demand and an equilibrium market for fuel. Firstly, those who access foreign currency from different sources and change it on the black market for the Zimbabwean dollar, create an excessive demand for fuel, which distorts the fuel equilibrium as shortages then arise.
There are also opportunities for arbitrage as a result of the shortages as well as exchange rate differentials for fuel sellers and buyers, which is why there currently is a thriving black market for fuel
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On the other hand, the fuel is also expensive for the majority of the working motoring public that earn their incomes in the Zimbabwean dollar, as one needs about ZW$1 200 on average for a full tank, which is a significant portion on their salary
If you see right now more than 60% of fuel is sold through the black market. You won’t find it on pumps but in drums at backyards. That should confirm to you that the official price is already wrong
Another economist Gift Mugano who is a trade economist said the Zimbabwean economy was not normal therefore it could not be governed by conventional economic theories.
More: The Zimbabwe Independent
