Zimbabwe scraps official parity for fuel imports

A fuel tanker offloads petrol in Harare, Zimbabwe, March 6, 2019. REUTERS/Philimon Bulawayo

HARARE (Reuters) – Oil companies in Zimbabwe will from Tuesday buy dollars to import fuel on the interbank market after the central bank ended the1:1 peg to the dollar that the firms were using, the bank said, a move that could see the price of fuel going up.

The Reserve Bank of Zimbabwe introduced a new local currency and an interbank market in February to allow companies and individuals to trade in forex.

Importers of fuel were, however, allowed to buy dollars from the central bank at a rate of 1:1 to the greenback.

That arrangement has ended and the companies would only access dollars on the interbank market from Tuesday, RBZ Governor John Mangudya said in a statement.

“The new position is necessary to promote the efficient use of foreign exchange and to minimize and guard against incidences of arbitrage within the economy,” Mangudya said.

Mangudya directed banks to ensure the ensure official exchange rate reflected market conditions.

Banks and companies had accused the central bank of manipulating the official exchange rate to keep the rate low compared to the black market.

Mangudya said at the weekend that the central bank had accessed a $500 million from international banks.

An official at the national treasury said African Export and Import Bank, which has continued to loan money to Zimbabwe in the absence of donor funding, had arranged the latest loan.

Any moves to increase the price of fuel could lead to unrest in a country where the majority population is struggling with soaring prices of basic goods.

The last hike in the price of fuel was met with violent street protests that killed a dozen people after a security crackdown.

Zimbabwe is experiencing a severe dollar crunch that has caused shortages of fuel and medicine.