Zimbabwe has become one of the world’s most expensive places to buy gasoline after President Emmerson Mnangagwa announced that fuel prices would double overnight, highlighting a currency crisis that has caused widespread shortages and lengthy queues at petrol stations across the southern African nation.
In a televised statement on Saturday, Mr Mnangagwa said petrol and diesel prices would rise to more than $3 a litre in an attempt to contain the queues.
The long lines of frustrated motorists illustrate the growing severity of a shortage of US dollars to pay for essential imports. The crisis has undermined the former security chief’s pledge to make the country “open for business” after he replaced Robert Mugabe in a 2017 military coup.
Mr Mnangagwa said the shortages were “attributable to increased fuel usage in the growing economy and compounded by rampant illegal currency and fuel trading activities” and were “unsustainable”.
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The steep price increase would shore up retailers and show “such politically motivated activities will not be tolerated”, he said.
Mr Mnangagwa’s move also comes as figures in the ruling Zanu-PF have alleged that a politically connected fuel cartel has captured state institutions and is profiting from the crisis.
They have also blamed the alleged cartel for signs of infighting between Mr Mnangagwa and his deputy Constantino Chiwenga. The two men have denied any rift, and a spokesperson for Mr Mnangagwa has denied there is any conspiracy connected to fuel.
The country pays about $100m a month for fuel imports. US dollars have been the main currency in Zimbabwe since hyperinflation in 2008 destroyed the Zimbabwean dollar.
The root cause of the currency crisis is runaway government spending financed by issuing electronic US dollars, such as debt sold to banks, without physical backing, according to economists and investors. Rising circulation of these surrogate dollars, including so-called “bond notes” issued in 2016, has led to hoarding of actual banknotes.
A decline in the black-market value of surrogates against the US dollar has accelerated in recent months, making a mockery of official insistence that they are worth the same and leading to surging prices for basic goods.
In recent weeks, doctors and teachers have protested in the capital against their salaries being paid in the electronic dollars, while businesses have shut down without foreign currency to finance operations.
Zimbabwe’s trade union congress called Saturday’s fuel price rise “insensitive and provocative” and urged people across the country to stay away from work in protest.
In a sign that companies are increasingly abandoning the surrogate dollars, Delta, a brewer that is one of Zimbabwe’s largest companies, recently said it would peg wholesale prices to hard US dollars. It backtracked following promises by the government to supply foreign currency.
Despite Mr Mnangagwa’s promises of reforms after decades of misrule by Mr Mugabe, the prospect of international financial aid to resolve the cash crisis has receded.
Hopes for a rapid reopening of the economy after the Mugabe era were dashed and Zimbabwe was largely returned to isolation from the west following last year’s election, which Mr Mnangagwa won but which was marred by violence from security forces and claims of vote-rigging.
In December an inquiry confirmed that soldiers shot six civilians dead during opposition protests around July’s poll. Although Mr Mnangagwa has called for an investigation, few believe he will antagonise the army that originally brought him to power.
Later this month Mr Mnangagwa will visit Russia, Belarus and central Asian states, and attend the World Economic Forum at Davos, but will not visit other western countries.
