KIGALI - Despite a firm subsidization strategy, the government yesterday finally succumbed to the mounting pressure from a volatile global oil market and announced an increase on pump prices of both petrol and diesel from Rwf 918 to Rwf 940 per litre.
The increase that was announced by the Ministry of Trade and Commerce Ministry represents 2% and it was described as modest by officials.
In the past few months, concerned government departments and fuel dealers have been engaged in stretched ‘internal discussions’ aimed at regulating, or even abating, the spill-over effect of what is now a worrying global oil crisis.
“We have realized that there will be need to increase prices in Kigali, starting tomorrow (Friday) – an increase by 22 francs or near that range, on both diesel and petrol,” Trade and Industry Minister, Monique Nsanzabaganwa, said in a news conference yesterday.
“Prices on the world market have been increasing sharply since last February when a barrel of crude oil which was at $70 has now increased up to $89, and still rising”.
According to Nsanzabaganwa, the reasons for the ongoing crisis range from the pirate situation along the Somalia coastline, increased global demand to increasing fuel transport charges from the east African coast.
In addition, is the potential disruption of oil tanker traffic by the oil spill in the US Gulf of Mexico.
The Kenyan pipeline company which the country depends on, has also increased fuel shipment costs through the Mombasa-Eldoret pipeline by about $5 per cubic metre and this too has had a substantial impact on local pump prices.
Nsanzabaganwa acknowledged that all these factors have brought about the “compound effect” that Rwanda could not escape.
“This is not an issue affecting Rwandans only – we (government) are responsible for managing this, together with dealers, and we are still able to keep the increase on the local market not as high as on the world market,” said the minister.
She stressed that had it not been for government intervention, the situation could have been much worse – “with prices increasing to Rwf 967 or more.”
To stabilize the local market scenario, Charles Lwanga, Rwanda Revenue Authority Director for Research and Planning, told The New Times that last year he government spent Rwf 25 billion in fuel subsidies,
A related MINICOM communiqué notes that the decision to raise pump prices by two percent is “modest” given the current government subsidy on both petrol and diesel which stands at 55 percent and 63 percent, respectively.