Regulation of fuel sector key to controlling inflation

A directive by the government to restrict fuel dealers from re-exporting the product to neighboring countries is fundamental in keeping the economy stable.

A directive by the government to restrict fuel dealers from re-exporting the product to neighboring countries is fundamental in keeping the economy stable.

Lately, fuel dealers have been re-exporting petroleum products to cash-in on the booming demand from regional countries. The move has at times contributed to shortages on the local market, hence leading to higher prices.

The Ministry of Trade and Industry says that the decision to put a cap on fuel re-exports is aimed at avoiding any risk of fuel shortage during the festive season.

This follows another fiscal policy by the treasury to lower fuel pump prices in the fiscal year 2011/12, which has helped tame the stubbornly rising prices of goods and services.

Although Rwanda’s inflation rate rose to 7.39 percent in the month of November 2011 compared to 0.23 percent in December 2010, it has been, throughout the year, the lowest in the region. This is partly because fuel pump prices have been falling.

Fuel dealers argue that the action will hurt their businesses through excess supply with less demand on the local market. Rwanda consumes between 15-20 million litres of fuel every month and the country has two fuel depots in Kabuye and Gatsata.

A recent survey by The New Times showed that petrol stations have enough stock to sustain the country’s demand for a month without fresh imports or tapping from government’s reserves. However, fuel remains a very sensitive product and any shortage or disruptions in supply would have dire consequences to the economy.

Therefore, the government needs to constantly monitor trends in this area in order to come up with proper policy actions necessary to protect consumers as well as ensure that dealers still make profits.

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