TIRI MASAWI
The Road Fund Administration (RFA) says a 50% reduction in the fuel levy over a three-month period will cost it about N$300 million in revenue, putting pressure on cash flow and road maintenance funding.
The government levies, added on litres of petrol and diesel to fund institutions such as the MVA Fund and RFA, were reduced from 1 April as fuel prices rose. Petrol increased by N$2.50 and diesel by N$4, driven by tensions between the United States of America and Iran that disrupted shipments through the Strait of Hormuz, a key global oil passage route.
The RFA, which collects billions annually from road user charges, with fuel levies being its biggest source of income, is set to be affected by the levy cut.
The 50% fuel levy reduction is expected to significantly reduce RFA’s income over the next three months.
“A 50% reduction in the fuel levy for the next three months, commencing 1 April 2026, will result in a proportional revenue decline of approximately N$300 million per month,” RFA chief executive officer Ali Ipinge told Namibia Business Review last week.
Ipinge said the financial year ended 31 March 2025, the Road Fund Administration collected a total of N$4.06 billion from road user charges, with the Fuel Levy being the largest contributor at N$2.56 billion. These funds are essential for maintaining and rehabilitating Namibia’s national road network and urban roads within local authorities,” RFA chief executive officer Ali Ipinge told Namibia Business Review last week.
He added that collections are expected to remain stable in the most recent financial year, pending audit confirmation.
“For the recently concluded financial year that ended 31 March 2026, the RFA estimates total collections of N$4.12 billion, with the fuel levy projected to account for N$3.08 billion. These preliminary figures are currently undergoing audit confirmation,” he said.
He warned that the total impact over the period would be substantial, depending on fuel consumption levels.
“While the exact figure will depend on actual fuel consumption levels, this reduction represents a severe short-term impact on collections and the ability to optimally fund road maintenance,” he said.
Ipinge said the reduction will affect cash flow but the institution is drawing lessons from past shocks to manage the situation.
“The reduction will have a notable short-term impact on cash flow; however, drawing on lessons learnt from a similar reduction during by the COVID-19 pandemic, the RFA is implementing measures to mitigate this shortfall and sustain funding stability,” he said.
He added that internal controls and cash flow management will be used to protect priority projects.
“The organisation continues to prioritise critical maintenance and funding commitments while navigating this adjustment through internal financial controls and proactive cash flow management,” he said.
Ipinge said global fuel market instability is also adding pressure on economic planning.
“Tensions in the Middle East have driven up fuel prices, impacting multiple key economic sectors across the country,” he said.
However, he said the RFA has already identified fuel levy dependency as a key risk and built safeguards into its planning systems.
“Because the RFA’s robust risk management framework identified fuel levy dependency as a top-five strategic risk, contingency measures are already built into our Integrated Strategic Business Plan (ISBP),” he said.
He added that reserve mechanisms will help absorb short-term shocks.
“The organisation can therefore rely on its reserve mechanisms to manage short-term revenue fluctuations,” he said.
However, he cautioned that a prolonged reduction would require further strategic decisions.
“While these measures are designed to absorb temporary shocks, prolonged reductions will necessitate further strategic adjustments,” he said.
MVA FUND TO LOSE N$74M AFTER FUEL LEVY CUT
Namibia Business Review reported last week that the Motor Vehicle Accident Fund (MVA Fund) will lose more than N$24 million per month in income following the government’s decision to reduce fuel levies by 50%, resulting in a total loss of about N$74 million over three months.
MVA Fund chief executive officer Rosalia Martins Hausiku confirmed that the reduction will directly affect the Fund’s financial position.
“The company normally collects about N$48 million per month from the fuel levy at a rate of 47.7 cents per litre, while its monthly claims expenses amount to N$31 million,” she said.
She said the cut changes the fund’s revenue structure and reduces the surplus used for operations and capital spending.
“This leaves only N$17 million to cover operational and capital expenditure. The 50% fuel levy reduction results in a monthly revenue of N$24 million at 23.85 cents per litre, whilst our monthly claims expenditure remains at N$31 million, notwithstanding other obligations,” she said.
Over the three-month period, she said the total loss in revenue will accumulate to N$74 million.
“Over a three-month period, the required revenue shortfall to fully cover our monthly obligations will therefore accumulate to N$72 million,” she said.
Despite the shortfall, Hausiku said the decision is understood within the broader context of economic relief efforts.
“While this represents a notable decrease in inflows, the measure is understood within the broader context of national economic relief efforts and the need to balance fiscal sustainability with social protection,” she said.
She added that the fund recognises the intention behind the intervention.
“We recognise that the decision is a necessary intervention to ease the burden of rising fuel prices on the consumer by cushioning them from escalating costs of basic goods and services,” she said.
COMMENTS