The New Dawn Government will extend and maintain the current subsidies or tax waivers on Value Added Tax (VAT), Excise Duty and Customs (Import) Duty on petroleum products – which are in line with Statutory Instrument (SI) number 3 of 2022 and coming to an end on 30th June 2022 – for another three months up to 30th September 2022.
VAT and Import Duty will remain waived (or zero-rated) on diesel and petrol, while Excise Duty is waived on Diesel and reduced on petrol. There is no tax regime on kerosene, as it were.
Though government policy is not to subsidise fuel imports in an attempt to trim Zambia’s perennial fiscal deficit and secure critical support for the economy, the government is also acutely aware of the impact that unfettered fuel price hikes cause.
With the war in Ukraine, there has been a worldwide trend where, months after recording unprecedented increases, fuel prices in many countries are again expected to reach new heights this month or the next. These challenging global market conditions have left the Zambian government with no other option but to adjust fuel prices to match international prices. The fuel price increases in Zambia in the last few months have been inevitable to save the country from defaults. The decisions to increase fuel prices have not been easy ones, as these adjustments can increase inflation and consequently add to people’s miseries.
However, the resolve by the previous government to borrow unsustainably has deteriorated the economy and the incumbent government is bearing the brunt of these poor machinations. This is because we have to service a lot of the debt left when those funds could have been used for these same needed subsidies and for social sectors that help our people to have a better life.
Notwithstanding the above, and with oil prices continuing to skyrocket, the New Dawn Government has had to come in and cushion what would be a dire situation had we totally removed the subsidies as originally planned before the Ukraine War started. The current subsidy programme, that has cushioned motorists from the shock of what would be higher prices of petroleum products, will therefore continue for another quarter. This, nevertheless, means that billions of Kwacha, which could have been raised from the taxes for the treasury, will be lost through these subsidies. This is a lot to other sectors of the economy that needed those funds.
We will review the situation at the end of the third quarter and see whether fundamentals will be in place to remove the subsidies or not.
Hon. Eng. Peter Chibwe Kapala
Minister of Energy