The global surge in oil prices and consequent hike in petroleum products prices will not affect Rwandans in the months of May and June after the government announced a move to subsidize the fuel products; petrol and diesel. According to the latest announcement by Rwanda Utilities and Regulatory Authority, with the global oil prices rising by about 17 per cent it would have seen local fuel prices go up by at least 7 per cent. This subsidy will see petrol and diesel prices remain as they were; Rwf1,088 and Rwf1,054 respectively. Global oil prices have been going up of recent after a sharp decline last year occasioned by reduced demand as a result of the Covid-19 related lockdowns and travel restrictions. However, in recent months as economies around the world resume activity as well as lifting of lockdowns, demand for fuel products has grown consequently driving prices. Ernest Nsabimana, the Director-General of RURA, explained that without a subsidy, the prices of diesel and petrol would have risen to about Rwf1,090 and Rwf1,161. This he said would have driven up transport costs of both people and goods thus driving up the cost of living. Transport costs are some of the key drivers of inflation in the country as was witnessed in the third quarter of 2020 due to its trickle-down effect on other services and goods. An increase in the cost of living would mean that a section of Rwandans would either have to forego other expenses to have enough for adjustment in transport costs or forgo some services altogether. Claver Gatete, the Minister of Infrastructure, said that the move is in addition to government efforts to subsidize public transport investing about Rwf29.3 billion. He said that without the subsidy, the cost of living in multiple aspects including food, transport, production among others which could have gone up significantly affecting welfare and quality of life of many. The subsidy intervention also comes at a time when the Central Bank is expecting to see global inflation go up at about 3.5 per cent as the global economy recovers. This could see increased revenue for Rwanda’s exports such as agriculture products and minerals at the same time exerting foreign exchange pressure on the Rwandan franc as cost of imports could go up as a result of the inflation. The franc is projected to depreciate by 6.5 per cent in 2021.
