DESPERATE LUNGU SUSPENDS VAT ON COOKING OIL FOR 4 MONTHS (ELECTION PERIOD)
President Edgar Lungu has supposedly signed a Statutory Instrument to scrap VAT on cooking oil until 31st October 2021.
This is deemed a last ditch attempt to control escalating cooking oil prices, what are rising sharply due to the high cost of imported raw materials driven by a rapid depreciation of the kwacha.
This is unlikely to result in a reduction in the price of cooking oil as the VAT will be kept by manufacturers and retailers as a cushion to maintain cooking oil prices and also cushion against the impact of a further depreciation of the kwacha against the dollar.
In January 2021,President Lungu suspended VAT and Excise Duty on petrol and diesel but the reduction was not passed onto consumers as prices remained the same.
The VAT was given to oil companies to keep, but even that has now become insufficient as the kwacha has depreciated above the 16% VAT in the last few months. A fuel price increase is likely over the next few weeks unless government introduces fuel subsidies.
The suspension of VAT is also expected to put further strain on the Ministry of Finance as revenue streams continue to reduce, which will ultimately culminate into failure to provide essential services and payment of salaries for civil servants.