The Department of Road Traffic and Safety Services (DRTSS) has placed fresh scrutiny on the government’s decision to suppress fuel prices despite calls from relevant stakeholders to adjust them.
President Lazarus Chakwera rejected Malawi Energy Regulatory Authority’s (Mera) proposal to hike fuel prices amid concerns that it would worsen inflation in the country.
However, suppressing fuel prices has negatively impacted the DRTSS capacity to generate revenue in the 2023/24 financial year.
According to the 2025 issue of the Annual Economic Report released by the Ministry of Finance and Economic Affairs, DRTSS missed its revenue target by K10.2 billion.
The directorate collected K7.89 billion as of November 2024 against a projected K12.1 billion, representing 65 percent of the estimated revenue.
Reads the report in part: “In the year under review, DRTSS had no funding from vehicle road tax collected as fuel levy [which DRTSS only accounts for], as well as funds from the Roads Fund Administration [RFA] to support a range of road safety interventions.”
Business Review calculation based on the figures presented in the report shows that the directorate was expected to collect K6.5 billion (K5.58 billion in vehicle road tax collected as fuel levy and K1 billion contribution for the RFA).
The DTRSS underperformance comes at a time when the RFA and Malawi Rural Electrification Programme were reportedly owed K161.2 billion and K123.8 billion, respectively.
Fuel importers have been withholding the levies and others collected through fuel pump prices to cover for losses in the importation of fuel as the landing costs have been higher than the selling price.
The performance may have far-reaching implications on economic growth, considering that the government has based part of its economic growth projections on developments in the construction and infrastructure sectors.
Catholic University economics lecturer Derrick Thomo cautioned that the artificially low fuel prices would drain the country’s forex reserves as the government prioritised imports of fuel.
“Artificially low prices also boost fuel demand, increasing imports and deepening forex scarcity,” he said in a WhatsApp response. “This usually strains critical imports like medicines and deters investment, risking stagflation—a period of the situation between high inflation and low growth.”
To address the imbalance, he urges the government to consider phasing out the subsidy and pair it with social protection programmes to cushion people who would be affected by the price adjustment and inflationary effects that might follow.
Agreeing with Thomo, World Bank country economist Anwar Mussa said a phased-approach would protect Malawians from steep price adjustments that emerge when government does not adjust pump prices.
He further allayed concerns that adjusting the price would have a severe effect on inflation, considering that only a “minority of Malawians, particularly in urban areas directly consume oil.”
He said in an emailed response: “This means the overall impact on inflation may be smaller than perceived and would primarily impact the richest 20 percent of Malawians.”
“Nonetheless, the suppression of fuel price increases through subsidies has led to artificial price stability in the short term, only for inflation to become highly volatile when subsidies become unsustainable, resulting in abrupt and steep price adjustments.”
