Zimbabwean Finance Minister Mthuli Ncube has warned that the country could be faced with further fuel price hikes to boost the new energy framework on the interbank forex market.
The move comes in the wake of violent protests in January after the government increased the price of fuel by about 150 percent.
Currently, petrol and diesel cost more than ZWL5 against the official exchange rate of 1:8 to the dollar.
If Ncube has his way, Zimbabwe’s new fuel price will top ZWL8.50.
The government has revamped the heavily subsidised Zimbabwe United Passenger Company to contain public anger.
Fuel shortages have persistently dogged Zimbabwe, although the amount of fuel consumption has been going down, according to Zimstats.
Diesel was the highest imported commodity between February and May at $307 million while petrol stood at $146m.
Analysts Equity Axis said: “Zimbabwe’s importation of fuel has reduced significantly between 2018 and 2019. Average monthly imports declined by 21 percent.
"The 2019 import levels are in line with 2017 average levels.”
This had resulted in Zimbabwe, which is battling to turn around its economy, recording a lower trade deficit of $93.6m in May, bringing the cumulative year-to-date total deficit to $332m.
“This (is) better than a deficit of $1.3 billion for the same period last year. This was, however, achieved through import suppression, including fuel and electricity,” Equity Axis said.
Ncube, who has previously resisted the urge to approve a power tariff increase, said the current pricing structure was not sustainable. He said the tariff would be adjusted upwards to match production costs in line with a request by Energy Minister Fortune Chasi.
Chasi is currently engaging Eskom and Mozambique to secure power supplies to offset crippling outages that have hit the nation.
However, observers have warned that further increase in electricity and fuel prices would heighten inflation, currently at 97.7 percent.