The price of fuel has increased in Zambia following the removal of subsidies on petroleum products to show the correct price of the commodity, according to the country’s energy regulator.

The price of petrol at the pumps rose to 21.16 Kwacha ($1.29) per litre from 17.62 per litre, whilst the price of diesel increased to 20.15 Kwacha per litre from 15.59 per litre, as per a statement by the Energy Regulation Board.

"This is following the announcement by the government that fuel subsidies will be removed so as to migrate to cost reflective pricing," it said.

Typically, economists view non-discretionary subsidies on the consumption of fuel as a wasteful use of state resources, which was echoed by Zambia’s Finance Minister, Situmbeko Musokotwane earlier this month: "When you freeze the (price of the) product, you are merely postponing the problem. Today we are sitting on unpaid bills for petroleum products (of) ... $480 million."

Since December 2019, the current pump prices have stayed artificially low, despite movements in global oil prices and the depreciation of the Kwacha, the regulator went on to say.

The Finance Minister said earlier in December that an International Monetary Fund programme to attempt to get the country’s global debt back under control would include the removal of unsustainable subsidies on energy and agriculture, according to a Reuters report.

Moreover, previously this month, Musokotwane said the country’s commitment to getting debt back to sustainable levels would result in price hikes, which may prove controversial: "The increase is going to come, because as a country we overborrowed," he said.

This month the IMF and Zambia came to a staff level agreement on a three-year extended credit facility worth $1.4 billion.