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ActionAid Zambia Raises Concerns Over Soaring Fuel Prices and Economic Impact

ActionAid Zambia (AAZ) has expressed deep concern over the significant increase in the prices of petroleum products, citing adverse effects on the country’s inflation rate and household incomes.

In an official statement issued by Jovina Newanzake, Interim Country Director of ActionAid Zambia, the organization refuted government claims that fuel subsidies primarily benefit only a minority of the population.

The statement highlighted the pass-through effect of the fuel price hikes, exacerbated by the rapid depreciation of the Kwacha, resulting in an inflation rate well above the targeted upper bound of 9 percent.

AAZ emphasized the detrimental impact on household incomes, particularly affecting vulnerable communities.

The organization pointed out that the increase in fuel prices was enforced in February 2024, following the approval of SDR 978.2 million (USD 1.3 billion) by the IMF Board in August 2022.

This approval led to the removal of fuel subsidies, resulting in a staggering 58.7 percent increase for petrol and a 39 percent increase for diesel since September 2022.

Additionally, AAZ raised awareness of the IMF’s condition to implement a cost-plus pricing model, adjusting fuel prices every 30 days, and the reinstatement of VAT and excise taxes on fuel.

Concerns were also voiced regarding the delayed public debt restructuring and its adverse effects on the economy.

AAZ reiterated its call for the government to prioritize the needs of the public while implementing IMF structural benchmarks, balancing citizen protection with macroeconomic stability actions.

The organization emphasized the importance of boosting revenue collection through progressive taxation and effectively restructuring public debt beyond bilateral creditors.

It also urged the government to ensure an enabling environment for the smooth delivery of social protection programs outlined in the 2024 National Budget, addressing challenges such as delayed receipts and non-receipt of social cash transfer funds for eligible citizens.

AAZ underscored the detrimental impact of monthly fuel price adjustments on small and medium-sized enterprises (SMEs), reducing their ability to forecast, plan, and remain profitable.

The organization called on the government to increase the pricing cycle for petroleum products and zero-rate the VAT applied to alleviate market changes absorbed by poor consumers.

Furthermore, AAZ urged the government to explore cost-effective alternatives in the oil supply chain, such as utilizing the existing TAZAMA pipeline, to reduce transport costs and the influence of suppliers in the domestic market.

The organization expressed concerns that rising poverty levels, particularly among marginalized groups such as women and young people, could continue if urgent measures are not taken to address the economic challenges exacerbated by soaring fuel prices.

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