“The move will soon result in increased fuel and electricity tariffs”.
By John Chola
Minister of Energy Peter Kapala has backed his Finance counterpart Situmbeko Musokotwane with his resolve to remove fuel and electricity subsidies claiming such a move will result in the state saving US$ 107 million per month or US$1.3 billion per year
Amidst several reminders by stakeholders that the UPND administration was backpedalling too quickly on its campaign promises to reduce fuel prices to even below K5 per litre of petrol, Minister Kapala insists that Zambia’s subsidies on fuel at about US$ 67 million per month or US$ 800 million per year and the subsidies on electricity are over US$ 40 million per month or US$ 500 million per year were detrimental to development.
“Cool down, don’t be scared. You will be happy in the next two, three years. You will pat us on our backs and say ‘Oh, we were just scared for nothing,” Kapala quoted his Finance counterpart Dr Musokotwane assuring the nation at a joint media briefing with the International Monetary Fund (IMF) held in Lusaka.
And Kapala stated that government was not procuring fuel on cash-basis which entails that the UPND government inherited a debt of $ 480 million to fuel sellers and suppliers for fuel which was gotten on credit and was never paid for while cash went to subsidies to keep fuel prices from naturally going up with market forces.
“These non-discretionary subsidies on fuel consumption are seen by experts as a wasteful use of state resources. Further, the government over-borrowed to a point where the nation is saddled with unsustainable debt,” insisted Kapala.
Dr Musokotwane yesterday vowed that Zambia was committed to bringing debt to sustainable levels.
Kapala said there was a need to take the brave step of removing or reducing subsidies to ensure that it can free up resources for development after renegotiating its debt with creditors.
Dr Musokotwane revealed that the IMF programme he had just announced, which will try to get the global debt mountain back under control, will include removing unsustainable subsidies on energy such as fuel and electricity.