On October 3, the Rwanda Utilities Regulatory Authority (RURA) announced an increase in the prices of petrol and diesel, adding to the already challenging cost of living in the country.
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The new prices which took effect on October 4, indicate that pump prices for petrol have increased to Rwf 1,822 per litre up from Rwf 1,639 while diesel increased from Rwf 1,492 per litre to Rwf 1,662.
Fuel prices are revised based primarily on price changes of the petroleum products registered on the international market. It last revised the prices in August.
Jimmy Gasore, Minister of Infrastructure, said that with these new prices, the government has continued to inject subsidies to share the burden with consumers, stating that for each diesel litre, the government is disbursing Rwf135.
In addition, he said that the government will cover the increase in fuel prices on public transport so that there won’t be a fare increase for commuters.
Currently, Rwanda imports all its petroleum products requirements from abroad since there is no local production. Hence, the pressure is most felt due to the continued increase in global crude oil prices with several members of the Organization of the Petroleum Exporting Countries (OPEC+) making oil cuts in April and extended to the end of 2024.
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In addition to that, Saudi Arabia and Russia, major oil-producing economies, announced voluntary cuts in September, exacerbating the prices on international markets.
Saudi Arabia extended its voluntary oil output cut of 1 million barrels per day (bpd) while Russia extended its oil export cuts by 300,000 bpd until the end of December 2023.
The Saudis also left open the possibility of increases, saying there would be monthly reviews to consider "deepening the cut or increasing production,” according to the Saudi Press Agency.
Aline Mutabazi, Economics lecturer at the University of Rwanda, said that in such a global crisis, developing countries are the most affected and can only face the situation with limited resources but in a strategic manner.
According to her, fuel increase means an increase in logistic cost which consequently impacts commodity prices on the market, however, if the agriculture season yields well, it can moderate price hikes for consumers in the near future.
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Jean-Chrysostome Ngabitsinze, Minister of Trade and Industry, said that the 11 per cent increase in diesel price which is commonly used in logistics does not mean that traders have the liberty to increase commodity prices by that same percentage on the market.
"The only pressure that can be felt on foodstuff prices is due to poor agricultural season B we had which saw a 3 per cent decrease in food crop production, meaning fewer commodities available while the demand increases,” he said.
Ngabitsinze added that the ministry is in discussion with stakeholders to assess the need and feasibility of waiving value-added tax on certain commodities, in addition to maize flour and rice as announced in April, as a means to curb food inflation.
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On the other hand, Angello Musinguzi, Senior Tax Manager at KPMG Rwanda, said that government subsidies are good but not sufficient enough to contain the current increase in consumer prices, as much is attributed to global issues.
Fuel prices affect almost every sector of the economy, he said, but there are other domestic factors involved in the high cost of living linked to the shortage of domestic supply, and unless the government finds alternative strategies, the issue will be prolonged.
"At the moment, we can only cope with the situation while seeking to increase domestic production to offset imports. We need to diversify what we export from coffee and tea and stop importing what we can produce locally,” Musinguzi noted.