November 26, 2021

IMF Wants Government Fuel Subsidies Removed


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Without the government intervention, you would be buying fuel at much higher rate

The International Monetary Fund (IMF) has called for “phasing-off” of government subsidies that are keeping fuel pump prices lower.

In early October, government through the Rwanda Utilities and Regulatory Authority announced it introduced subsidies that have maintained fuel rates at a much lower rate.

Today, a litre of diesel costs Rwf 1,054, while petrol goes for Rwf 1,143.

Without the government backing, drivers would be buying the same litre at Rwf1,134 for diesel and Rwf1,134 for petrol.

This would automatically impact on the transport costs, thereby increasing prices of goods in shops. It would have been the ordinary consumer facing the pain, yet already, more people are facing tough economic times.

Now, the IMF says that as part of measures to put a curb on the country’s growing debt, which is projected to rise to 75 percent of GDP in 2021, the fuel subsidy has to be removed.

The IMF writes in its November 15 statement on Rwanda: “As a result of the extraordinary policy measures to address the COVID-19 impact, public debt is projected to rise to 75 percent of GDP in 2021.”

“While Rwanda’s risk of debt distress is expected to remain moderate, risks have heightened. This calls for fiscal consolidation efforts to start in earnest buttressed by the phasing-off of recently introduced measures (the reduction in fuel levy and tax exemptions) along with credible domestic revenue mobilization and spending rationalization measures.”

Government said the subsidies were brought in to control inflation.

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