Zimbabwe could be bleeding as much as US$4,3 million every month after the government introduced sweeping fuel tax recalibrations in response to global oil market turbulence triggered by the Middle East conflict, new research showed this week.
The findings emerge from a fresh analysis by Harare-based think tank Africa Economic Development Strategies (AEDS), which says authorities have been forced into increasingly difficult trade-offs as they battle to contain inflation, while shielding productive sectors from surging fuel costs.
Zimbabwe is among several African economies trapped between stabilising fuel prices and preserving strained fiscal revenues after oil markets convulsed following renewed tensions between the United States and Iran in February.
Uncertainty escalated after hostilities linked to the conflict raised concerns over disruptions to the Strait of Hormuz, a strategic shipping corridor through which nearly a third of global crude supplies pass.
Like many African governments heavily exposed to imported fuel shocks, Zimbabwe reacted aggressively.
But while the interventions were designed to cushion industries from runaway energy costs, AEDS said the measures also exposed Treasury to significant write-downs.
“On taxes and levies, prior to the Iran war, the Government of Zimbabwe levies for diesel and petrol stood at US$0,572 and US$0,632 per litre, respectively,” AEDS said in its first quarter Zimbabwe Economic Pulse report. “In response to the surge in global fuel prices, Treasury reduced taxes for diesel by 25% — that is from US$0,572 to US$0,422 — and increased taxes for petrol by 36% from US$0,632 to US$0,857 per litre.”
The advisory said authorities moved to cushion productive sectors heavily reliant on diesel-powered operations.
- New Perspectives: Gold coins alone will not tame Zim’s inflation
- Fears of jobs carnage as crisis deepens
- Binga to Rwanda: ED’s dilemma
- New Perspectives: Gold coins alone will not tame Zim’s inflation
Keep Reading
“A net reduction in expected fuel tax revenue of approximately US$4,3 million per month (is expected),” AEDS said, noting the biggest fiscal hit came from diesel tax cuts.
“Government will experience a reduction in expected diesel tax revenue of approximately US$16,2 million per month after reducing taxes by US$0,15 per litre.”
Although Treasury is expected to recover part of the shortfall through higher petrol taxes, the compensation remains inadequate.
“Government will gain approximately US$12 million in additional revenue per month from petrol after increasing the tax by US$0,225 per litre,” the report said.
In a way, the analysis showed the government took steps to “penalise petrol consumption” and cushion diesel consumption to reduce the likely impact on inflation.
Petrol is largely used by individuals, while diesel is predominantly used by industry.
“While taxes from diesel are expected to decline, there is partial recovery from petrol taxes, which have increased. Dealer margins and distribution costs have largely remained constant, meaning that the pricing adjustments have generally left other stakeholders unaffected,” it added.
The revelations come weeks after a high-level continental study identified Zimbabwe as the African country that imposed the sharpest fuel price increases during the first month of the latest oil shock.
In the months that followed, war-torn Somalia overtook Zimbabwe after adding 130% increases to its fuel prices, according to industry reports.
The 63-page report — jointly prepared by the United Nations Development Programme, the African Union, the Economic Commission for Africa and the African Development Bank — placed Zimbabwe at the centre of growing debate over fuel pricing distortions, taxation and the mounting burden being carried by consumers and business.
According to the report, Zimbabwe increased petrol prices by 39,1% between February 23 and March 23, 2026 — the steepest adjustment among African countries monitored during the review period.
The increase placed Zimbabwe far ahead of Egypt, which implemented a 14,3% increase, while Morocco recorded a 13,9% rise and Sierra Leone posted a 12,3% adjustment.
Zimbabwe also led the continent in diesel price hikes after authorities approved a 35% increase during the same review period.
Sierra Leone followed at 22,8%, Morocco recorded a 21,4% increase, Ghana implemented an 18,6% adjustment, while Egypt posted a 17,1% rise.
By contrast, Cabo Verde, Lesotho, Tanzania and Rwanda maintained single-digit increases, while South Africa implemented fuel price increases of about 1% during the review cycle.
The developments have intensified scrutiny over Zimbabwe’s fuel pricing structure, with analysts arguing that the country’s response to global shocks continues to magnify domestic economic vulnerabilities.
The Zimbabwe Energy Regulatory Authority declined to comment on the findings.
But business leaders say structural distortions within Zimbabwe’s fuel market continue to drive pump prices far above those prevailing in neighbouring countries.
Zimbabwe National Chamber of Commerce chief executive officer Chris Mugaga told the Zimbabwe Independent recently that the country’s fuel pricing challenges begin long before products reach service stations.
“And the major reason why fuel prices in Zimbabwe are relatively higher than regional peers is due to the free on-board (FOB) price, which the seller charges before the fuel is shipped to Zimbabwe,” Mugaga said.
“So, in terms of FOB price, Zimbabwe is on average 20% above the regional average. Before you analyse anything, just on FOB, Zimbabwe is already 20% above the average. Then outside that is the excise duty. For almost every litre of fuel, it’s 54 US cents. Then you talk of the road levy. All those are costs relatively higher than the regional average too.”
He said Zimbabwe’s exclusion from multilateral financing support structures was also worsening the country’s vulnerability to imported inflation shocks.
“And unlike most of these countries which get balance of payment support from the IMF and the World Bank, Zimbabwe has no access to all those facilities,” he added.
Researchers at Harare-based advisory firm Equity Axis also recently raised concerns over widening disparities between Zimbabwe’s fuel prices and those prevailing in neighbouring countries.
In a recent note to investors, the advisory described the situation as a “structural anomaly”.
“Fuel trucks moving through Harare’s Msasa depots, through Karoi, Makuti and down the Zambezi escarpment to Chirundu, carry a product that ultimately retails at a lower price in Lusaka than in Harare,” Equity Axis said. “This is not a marginal pricing discrepancy. It is a structural anomaly.”
The advisory noted that despite Zimbabwe’s recent ethanol blending adjustments, local fuel prices remain significantly above regional averages. It said petrol in Zambia (about three weeks ago) retailed at about US$1,42 per litre following tax reductions introduced in March.
The differential means Zimbabwean motorists were paying about 46% more for petrol than consumers in Zambia.
Diesel comparisons painted a similar picture.
Zimbabwe’s diesel price of US$2,09 per litre at the time compared with Zambia’s US$1,56 and South Africa’s average of roughly US$1,42 per litre. Namibia also reduced fuel levies by 50% effective April 1.
The latest developments come as Zimbabwean companies battle one of the harshest operating environments in the region, characterised by subdued consumer demand, persistent liquidity shortages, high borrowing costs and growing tax pressures.
Energy minister July Moyo was not available for comment.
