Millions in fuel levies collected but no physical reserves, minister admits

The government’s handling of Zimbabwe’s strategic fuel reserve levy came under fresh scrutiny after questions were raised over why the country continues to cushion fuel price shocks through tax adjustments despite having collected the levy for years.

Questions persist over the size, management and utilisation of the funds collected under the levy, even as the government maintains that its approach is a flexible and cost-effective way of cushioning consumers against international fuel price shocks.

The issue was raised in Parliament recently, where opposition legislators demanded clarity on how the money has been managed and whether it has been used for its intended purpose.

The issue arose after Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube outlined government measures to cushion motorists and businesses from rising international oil prices by reducing fuel taxes and levies to keep pump prices below US$2 per litre.

His explanation prompted MP Edwin Mushoriwa to question why the government still needed to react to global fuel price shocks if Zimbabwe had been collecting a strategic fuel reserve levy over many years.

“Could you advise this House that when it comes to fuel, we have been imposing strategic reserve taxes all these years? Why should we be in shock when we have millions of dollars that we have paid for a strategic reserve? Where are our strategic reserves that were supposed to cushion us at a time like this? What happened to that money?” Mushoriwa said.

Responding to the question, the finance minister said a strategic fuel reserve does not necessarily have to exist as physical fuel stored in depots.

Instead, he said, Zimbabwe had opted to maintain the reserve in the form of cash, arguing that storing fuel attracts significant storage costs.

“There are two ways in which a strategic reserve is managed. You either manage it in the form of cash or you manage it in the form of physical goods or commodities stored somewhere,” Prof Ncube said.

“When you store it somewhere, you also incur storage costs. There is a cost associated with that. So, we decided to use the former approach, which is that the reserve is in the form of cash, whose equivalent in the form of taxes. We adjust whenever it is needed… in order to cushion the increase in citizens.”

The finance minister said the government effectively deploys the value of the reserve by reducing fuel taxes and levies whenever international oil prices spike, thereby softening the impact on consumers.

“In a way, what we are doing is we are using the taxes that are collected from these levies to cushion citizens and the effect is the same,” he said.

Prof Ncube argued the strategy has helped Zimbabwe avoid the fuel shortages and long queues experienced by some countries in the region during periods of global oil price volatility.

“This is why we have not seen any fuel queues when you look at the impact so far on Zimbabwe. Yes, we have had price increases. If you look around the region… you have seen fuel queues and you have seen challenges. We are not having those challenges because we have managed things well,” he said.

However, Mushoriwa remained unconvinced, arguing the minister had not answered the central question regarding the whereabouts of the accumulated funds collected through the strategic reserve levy.

“The Minister did not even answer my question. The question is, we have been displaying a strategic reserve tax over the years and if the Minister is saying that we are keeping the money in cash, where is the money?” he asked.

The Temporary Speaker intervened, ruling the finance minister had adequately explained that the funds were utilised through fuel subsidies rather than maintained as a separate physical reserve.

The parliamentary exchange highlighted broader concerns over transparency and accountability in the management of dedicated public levies.