Fuel prices rise in Rwanda despite government subsidy

Rwanda has increased its fuel prices, reflecting the little impact the bi-monthly government subsidy has had.

The latest prices, effective Monday, August 8, will see a litre of petrol retail at Rwf1,609 ($ 1.54), up from Rwf1,460 ($1.39) two months ago. A litre of diesel will sell at Rwf1,607 ($1.53), an increase from Rwf1,503 ($1.43).

The next fuel price review will be in October.

The Minister of Infrastructure Dr. Ernest Nsabimana attributed the rising costs to the Russia-Ukraine war. He said since the war began early this year, oil prices have more than doubled. In February, a barrel of crude oil was at $0.57; by the end of July, it had hit $0.97.

Dr. Nsabimana said he expects the prices to rise even higher in the next few months if the China-Taiwan situation escalates.

The price increases pile more pressure on households and motorists, given that diesel is a key determinant of the basket of goods and services used to measure inflation.

Cost of goods

According to the National Institute of Statistics, Rwanda’s general Producer Price Index, the monthly measure of change in the prices received by domestic producers, recorded an annual increase of 14.6 percent in June. Local prices increased by 15.3 percent, while export prices increased by 12.8 percent.

Producers of services such as electricity and manufactured goods usually factor in the higher cost of petroleum.

The government has invested Rwf10 billion ($10.1 million) to salvage the prices that would have increased to Rwf1,757 ($1.68) per litre of diesel and Rwf1,767 ($1.69) for a litre of petrol. Since July, the government has invested $23 million in fuel subsidies.

Rwanda introduced fuel subsidies in August 2021 with Rwf15 billion ($14 million). Prices at the time had increased to Rwf1,172 ($1.12) for petrol and Rwf1,122 ($1.07) for diesel.

Transport, food costs

While transporters are not allowed to adjust fares in response to the fuel price rise, the operators in the public transport business say the increase is eating into their profits. They say the subsidy of Rwf29 billion ($28 million) issued by the government in 2021 is no longer helping. While fuel prices have increased every two months since 2021, the public transport tariff was last revised in June 2021.

“Some small bus companies that travel to less populous areas have quit. There are buses we no longer see here. Some companies have also cut on the number of buses in operations,” said Joseph Muhumuza, a supervisor at Nyabugogo bus station.

The fuel price increase and the June-July dry season have hit food markets hard, worsening basic food prices and squeezing hard household budgets.

For instance, a litre of processed milk surged from Rwf450 ($0.43) in April to the current Rwf600 ($0.57). A tray of eggs is retailing at Rwf5,400 ($5.17) from Rwf3,600 ($3.45) in April. Some staple foods at the Kimironko market, one of the major food markets in Kigali, have almost doubled. Dry beans have reached Rwf1,500 ($1.44) per kilo, up from Rwf900 ($0.86) earlier this year, while Irish potatoes now cost Rwf660 ($0.63).