HARARE – The government says it will maintain a subsidy on electricity to keep prices low, rejecting demands by power utility ZESA to raise prices in response to the collapse of the RTGS dollar.
ZESA said last month it had applied to the energy regulator to raise its tariff by 30 percent for maintenance of its grid and after the price of diesel and other inputs went up.
Finance Minister Mthuli Ncube told a parliamentary committee on Monday that although electricity was still cheaper compared to regional peers, at 2.5 U.S. cents per kilowatt hour, any further tariff increase would hit consumers hard.
“Any ill-advised sharp tariff rate increase combined with the power outages will be most unpopular and unwelcome and will certainly trigger another round of price increases and inflation,” Ncube said.
Zimbabweans are currently enduring power cuts of up to eight hours daily, due to reduced generation at Kariba owing to the drought. ZESA is unable to import power to cover the gap because of a crippling lack of foreign currency in the country.
The government blamed exporters for exacerbating a dollar shortage.
Zimbabwe is gripped by a severe dollar crunch, a tumbling local currency and mounting inflation, which hit 75.86 percent in April.
Anger over fuel and medicine shortages triggered violent street protests in January and has piled pressure on the government of President Emmerson Mnangagwa who had promised to revive the economy after winning disputed elections last year.
The crisis and worries of further unrest have undermined Mnangagwa’s efforts to win back foreign investors.
On Tuesday, the local RTGS dollar was trading at 5.07 to the U.S. dollar compared to 5.5 on Friday. On the black market, the unit was weaker at 7.3 versus 7 on Friday, traders said.
The new currency has lost 50 percent of its value on the interbank market since it started trading on February 22.
Zimbabwe last week hiked fuel prices by around half, the second sharp rise in four months, a day after the central bank effectively removed a subsidy by ending oil importers’ access to U.S. dollars at a favourable rate. – Reuters
