Zimbabwe to Subsidize Public Transport as Inflation Jumps

By Bloomberg 21 May 2019
A cyclist rides along a dirt track past shanty dwellings in the Mbare township in Harare, Zimbabwe, on Monday, July 30, 2018. Photographer: Waldo Swiegers/Bloomberg

Zimbabwe will subsidize public transport and cut fuel duties by more than half as it tries to ease the impact of rampant inflation on its poorest citizens, according to Finance Secretary George Guvamatanga. Still, the country raised fuel prices by 46% on Tuesday.

The support will cost about $8 million a month, Guvamatanga said by phone on Monday. “A quantified, budgeted and targeted subsidy is a good subsidy,” he said. The cut in duties is to counteract the rise in fuel prices which would have been even higher had they not been reduced, he said.

The measure was introduced as the central bank and finance ministry injected $500 million to improve the liquidity of the foreign-exchange interbank market. Fuel importers will no longer get their currency from the central bank but instead will buy it on the interbank market, said Guvamatanga.

Zimbabwean President Emmerson Mnangagwa, who took power in 2017, has been trying to revive a collapsing economy by luring investment and appointing Mthuli Ncube, an economist rather than a politician, as finance minister. Still, inflation is at 76%, the highest since 2008, and there are shortages of medicine and fuel.

In addition to the $500 million injection, there is $800 million in exporters’ so-called nostro accounts and a further $800 million expected within 60 days, said Guvamatanga. The government will introduce measures to make the market more transparent, he said.

A fair rate for the RTGS$ currency, which doesn’t trade outside Zimbabwe, is between 3.5 and 4 per dollar, he said. The currency traded at 3.49 per dollar in the interbank market on Tuesday and at 5.7 per dollar on the black market. DM


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