Malawi saves K36bn on auto-fuel pricing

Malawi Government has saved K36 billion through the adoption of the automatic pricing mechanism (APM) on fuel in May 2012, Finance Minister Dr. Ken Lipenga said on Friday.

Lipenga, presenting the Mid-Term Budget Review, said the removal of price controls was necessary to reduce the burden of subsidies on fuel and utilities in the budget.

“Subsidies on fuel are very costly. In 2011, the cost was K10.5 billion and if this honourable House had not adopted the automatic pricing mechanism (APM) in May 2012, the cost of fuel subsidies by the end of the year would have been K36 billion.

“This would have had to be paid for by the government through cuts elsewhere in the budget or through increased borrowing, with disastrous results,” said Lipenga.

He, therefore, observed that the decision to remove subsidies on fuel and utilities was correct as it freed resources within the budget for priority investments for growth and social protection.

“When we refer to the automatic fuel pricing, what we are really talking about is putting an end to a very expensive subsidy that benefits a few at the expense of the many. It is a rejection of the idea that the rural Malawian in her/his village must pay for an expensive fuel subsidy for a minority,” said Lipenga. 

He added that since every policy change produces winners and losers, the policy changes that the current government has embarked on ought to also benefit the voiceless who work hard every day just to feed their children and send them to school.— Mana