The Ministry of Trade and Regional Development has announced an adjustment to the retail prices of fuel products, which will take effect from October 09, 2024, at 06:00 a.m. The price changes are part of a broader macroeconomic reform effort, including a restructuring of the foreign exchange management system, first implemented in late July 2024.
The reform is aimed at improving business efficiency and addressing issues that have affected the sector for over three decades, such as transparency and free competition. The government has indicated that the foreign exchange policy changes will now allow foreign investors with local income to participate in wholesale and retail business sectors, which has previously been reserved for domestic investors.
In response to rising global oil prices, the government has kept fuel prices stable over the last two months through subsidies, spending over 35.8 billion birr to avoid burdening consumers. However, officials note that the current price of fuel in Ethiopia remains significantly lower than that of neighboring countries, which has led to smuggling and illegal trading activities. As a result, a phased approach to adjusting fuel prices is now considered necessary.
Key Details of the Price Adjustment Strategy
The new strategy involves periodic adjustments in fuel prices over the next year, with the government continuing to provide subsidies to reduce the impact on consumers. Under the strategy:
For gasoline and jet fuel, 25% of the price increase will be passed on to consumers every three months, with the remaining 75% subsidized by the government.
For white diesel and kerosene, consumers will cover 20% of the price increase, while the government will subsidize the rest.
The prices of light black diesel and heavy black diesel will be passed directly to consumers without any subsidies.
Below outlines the new retail prices for Addis Ababa:
Gasoline:
New Price: 91.14 Birr/Liter
Consumer’s Share: 8.54 Birr
Government Subsidy: 26.14 Birr
White Diesel:
New Price: 90.28 Birr/Liter
Consumer’s Share: 6.54 Birr
Government Subsidy: 26.72 Birr
Kerosene:
New Price: 90.28 Birr/Liter
Consumer’s Share: 6.54 Birr
Government Subsidy: 26.72 Birr
Light Black Diesel:
New Price: 100.20 Birr/Liter
No Government Subsidy
Heavy Black Diesel:
New Price: 97.67 Birr/Liter
No Government Subsidy
Aircraft Fuel:
New Price: 77.76 Birr/Liter
Consumer’s Share: 6.93 Birr
Government Subsidy: 28.25 Birr
For example, the price of gasoline will rise from 82.60 birr per liter to 91.14 birr, with consumers paying 8.54 birr of the increase, while the government covers the remaining 26.14 birr through subsidies. Similarly, white diesel will see an increase of 33.28 birr per liter, of which consumers will pay 6.54 birr.
While this adjustment is expected to place some additional costs on consumers, the government has committed to spending approximately 33 billion birr on subsidies over the next three months, with the total cost potentially exceeding 100 billion birr in one year if global oil prices remain stable.
The Ministry of Trade and Regional Development emphasized the importance of this adjustment in balancing market stability and economic reform, and it called on the public to report any unfair price increases by businesses during the transition period.
Ministry of Trade and Regional Development
September 28, 2017
