**<u>Figure 2. Electricity Tariffs in Sub-Saharan Africa</u>** **_<u>(US$/kWh)</u>_**

<!-- Start of picture text --> 0.70<br>0.60<br>0.50<br>0.40<br>0.30<br>0.20<br>0.10 0.05<br>0.00<br>Source: Trimble et al. 2016.<br>Note: Constant 2014 US$ per kWh sold, excluding VAT.<br>Ethiopia Sudan Zambia Lesotho South Africa Mozambique Congo, Rep. Zimbabwe Ghana Guinea Cameroon Kenya Uganda Mali Gabon Comoros Rwanda Senegal Sierra Leone Liberia<br><!-- End of picture text -->

# _Fuels_

Zambia imports fuel, and the government handles all procurement. The bulk of the unprocessed feedstock imports traditionally are brought to the state-owned Indeni refinery (via the state-owned Tazama pipeline), in which they are refined to obtain the final market mix.<sup>12</sup> In recent years, imports of refined products, also procured by the government, gradually have increased and now represent approximately 50 percent of total fuel imports. These fuels are being imported directly by road. Retail prices set by the government do not adjust automatically to input price changes or production costs. Consequently, as market prices for fuel increase and the Zambian Kwacha loses value, for example, against other trading currencies, fuel subsidies have become the norm. The financing gap is covered directly by an on-budget transfer. This implicit fuel subsidy cost the government approximately $500 million in 2015.

Managed retail prices do not systematically adjust to reflect actual costs; therefore, implicit fuel subsidies are the norm. From early 2010 to mid-2014, retail prices in kwacha rose by close to 60 percent for both petrol and diesel. In contrast, during the same period, measured in US dollars, the price increases were lower at just under 20 percent, approximately only half of the almost 40 percent increase in the price of crude oil. In the second half of 2014, the drop in international oil prices lowered the cost-reflective price below the retail price for some shipments. In January 2015, retail prices were reduced by 20 percent which brought retail prices again _under_ the cost-reflective price.<sup>13</sup>

# _Farmer Input Support Program (FISP)_

In 2002–03, the Government of Zambia introduced the Farmer Input Support Program (FISP). Its purpose is to improve the supply and delivery of fertilizer and seeds for maize production<sup>14</sup> at subsidized prices to

> 12 A blend of crude oil, condensate, naphtha, and gasoil (diesel).

> 13 Retail prices increases of 9 percent and 15 percent were approved in May and July 2015, respectively, but these increases did not bring the retail price to or above the cost-reflective price.

> 14 In the early years of the program (2002/03–2008/09), participating farmers received 400 kg of fertilizer (200 kg each of compound D and urea), and 20 kg of hybrid maize seed at a 50% subsidy. From 2009/10 on, the input pack size was halved to 200 kg of fertilizer and 10 kg of hybrid maize seed. In 2010/11, small quantities of rice seed were added to the program; and in 2011/12, sorghum, cotton, and groundnut seed were added. In 2014/15 cottonseed was dropped, and the groundnut seed quantity increased more than 10-fold. Subsidy rates have varied over time, ranging from 50%–79% for fertilizer, and 50%–100% for seed.

10