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‘Duty to trigger inflation’

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Finance minister Tendai Biti’s announcement on Wednesday that he would increase excise duty on fuel is likely to trigger inflation, economic analysts have warned.

Biti proposed in his Mid-Term Fiscal Policy Review Statement to raise duty on diesel and petrol from 16 and 20 cents per litre respectively, to 20 and 25 cents per litre with effect from next month.

Economic analyst Christopher Mugaga from Econometer, a regional economic research company, said the increase would trigger inflation if unscrupulous fuel dealers attempt to take advantage of the duty increase. He, however, expressed optimism that the increase in duty was unlikely to change the prices of both petrol and crude oil whose price recently fell from US$124 per barrel three months ago to US$101 per barrel last month. “I think the increase in duty, won’t cause fuel inflation. If you’ll factor in that duty, you’ll find that it’s insignificant especially in the short term unless if the guys involved in fuel dealing decide to take advantage of the situation,” Mugaga said.

However, Proffessor Mandivamba Rukuni, an agricultural expert, said the looming fuel price increases are set to heavily affect the farming sector.

“We can have diesel prices going up without stabilising electricity supply. This will mean an extra cost to farmers who rely on diesel as a source of energy in the absence of power,” Rukuni said.

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