Tanzania suspends fuel levy to cushion citizens from costly pump prices

By BOB KARASHANI, Dar es Salaam, Tanzania

Tanzania has suspended the fuel levy for the next three months to cushion consumers from cost increases as it anticipates a spike in global oil prices following the Russia-Ukraine war.

The Ministry of Energy, in a statement on Monday, said that the Tsh100 ($0.043) surcharge on a litre of petrol, diesel, and kerosene, imposed since July 2021, has been scrapped as the government monitors the international market in the face of the eastern Europe conflict.

The suspension will remain in place until May 2022.

“Despite the fact that this decision will cause the government to lose about Tsh30 billion ($12.95 million) in monthly revenue, it is seen as necessary to protect the citizenry against the impacts of global oil prices worldwide,” the ministry said.

“If this decision had not been made, pump prices in Tanzania from March onwards would have become far too high for various reasons, including the war that is developing in Eastern Europe,” it added.

The statement said Energy Minister January Makamba had already signed the amendment to the legislation establishing the fuel levy.

The price change will reflect in next month’s pump prices review to be announced by the Energy and Water Utilities Regulatory Authority (Ewura) on March 2.

In February, petrol has been selling at between Tsh2,480 ($1.078) and Tsh2,712 ($1.18), and diesel Tsh2,338 ($1.016) to 2,570 ($1.12) per litre, depending on location from the coast.

The government introduced the fuel levy via the new Finance Act of 2021, which came into effect on July 1 last year, the start of the current financial year 2021/2022.

Rising prices for petroleum products have been cited by the Bank of Tanzania as one of the main reasons, along with food prices, for a corresponding rise in the country’s inflation rate.

In its January 2022 economic review, the central bank said that inflation in the energy, fuel and utilities shot up from 3.4 percent in November 2021 to 4.4 percent in December in tandem with increases in domestic pump prices for petroleum products.

Russia, which invaded Ukraine last week, is facing severe disruption to its exports of all commodities from oil to grains after Western nations imposed stiff sanctions on Moscow and cut off some Russian banks from the SWIFT international payment system. Russian accounts for about 10 percent of the global oil supply.