Tanzania government announces $43mn fuel subsidy

Tanzania will spare motorists and households high pump price increases next month after the government announced a $43 million fuel subsidy on Tuesday. Gabriel Mwangónda, Managing Director, Segax Group Limited joins CNBC Africa for more.

Wed, 11 May 2022 10:13:20 GMT

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AI Generated Summary

The Tanzanian government announced a $43 million fuel subsidy to cushion the public from high pump prices triggered by global factors like the Russia-Ukraine conflict.
The subsidy is a short-term measure designed to provide temporary relief until the new fiscal year, with the government exploring tax adjustments to ease the tax burden on fuel consumers.
Gabriel Mwangónda highlighted the need for Tanzania to diversify its energy sources by leveraging alternatives like gas to reduce reliance on diesel and petrol in the long run.

Tanzania, like many other countries, is grappling with the impact of skyrocketing oil prices driven by the Russia-Ukraine conflict. The recent announcement of a $43 million fuel subsidy by the Tanzanian government aims to provide relief to both motorists and households in the country facing the brunt of high pump prices. Gabriel Mwangónda, the Managing Director of Segax Group Limited, shed light on the current fuel situation in Tanzania during a recent interview with CNBC Africa. Mwangónda highlighted the government's strategy of procuring fuel well in advance through a park procurement system, ensuring a steady supply for at least three months. This approach has helped Tanzania maintain adequate fuel reserves, preventing any shortage despite the lack of official strategic reserves. However, the main challenge facing the country now is the unprecedented surge in fuel prices. In the wake of February and March's record-high fuel prices, Tanzania is witnessing petrol being sold at over 3000 Tanzanian shillings per liter, causing significant public outcry and economic strain. The Tanzanian government's response to this crisis comes in the form of a $43 million subsidy aimed at stabilizing fuel prices and mitigating the escalating cost of living. Mwangónda underscored the temporary nature of this subsidy, noting that it is designed to bridge the gap until the new fiscal year. The government is also contemplating tax measures to alleviate the heavy tax burden on fuel, with nearly 900% of the pump price going to government coffers. Despite the short-term relief provided by the subsidy, concerns persist about its long-term sustainability in the face of volatile global oil markets. Mwangónda emphasized the importance of exploring alternative energy sources like gas to reduce dependency on diesel and petrol, which could offer a more stable and cost-effective solution for Tanzania's energy needs. The subsidy may offer immediate respite to consumers but addressing the underlying challenges of high fuel prices requires a multifaceted approach that considers both short-term interventions and long-term energy strategies.