The Rwandan government is under pressure to expand its existing fuel subsidy to prevent another increase in the pump price of diesel. The current maximum retail price of diesel stands at Rwf2,927 per litre, maintained largely through government support. Without intervention, officials indicate the price would have reached about Rwf3,600 per litre. Between March and June 2026, the government spent nearly Rwf48 billion cushioning consumers and businesses from international fuel price increases.
Diesel has developed its own global supply problem, driven by tight global distillate supplies and elevated refining margins. The fuel is crucial to freight, agriculture, construction, mining, and industry, making its demand relatively less sensitive to price increases. A truck still has to deliver food, a tractor still has to work a field, and a construction machine still has to operate, regardless of diesel price hikes.
The supply side of diesel is also different from petrol, with refineries having technical limits on how much they can shift production towards diesel. When diesel inventories are already low, even a relatively modest disruption can cause prices to jump. The US Energy Information Administration points to tight global distillate supplies and elevated refining margins as important drivers of diesel prices.
The difference in market conditions between diesel and petrol is reflected in the diesel crack spread, essentially the margin between the price refiners receive for diesel and the cost of the crude used to produce it. This margin has become unusually large, indicating the market is paying a substantial premium for refined diesel rather than just the underlying crude.
Rwanda feels the shock of the global diesel squeeze more sharply due to its position as a landlocked, import-dependent economy. The country must pay not only for the refined product itself but also for transportation, storage, and logistics from international suppliers to regional ports and then overland to Rwanda.
Prime Minister Justin Nsengiyumva has acknowledged the size of the shock, stating that without government intervention, diesel would be selling at around Rwf3,600 per litre rather than the controlled price of Rwf2,927. The subsidy was introduced after global fuel prices surged amid conflict and disruptions around the Middle East and the Strait of Hormuz.
The government faces a difficult calculation in maintaining the current price, as it requires continued intervention to keep the price affordable. The subsidy dilemma involves balancing the need to support consumers and businesses with the rising costs of diesel, which could lead to higher fares, trucking costs, and ultimately, inflationary pressure.
Key points
- The Rwandan government spent nearly Rwf48 billion between March and June 2026 to cushion consumers and businesses from international fuel price increases.
- Without government intervention, diesel would be selling at around Rwf3,600 per litre, according to Prime Minister Justin Nsengiyumva.
- The subsidy amounts to roughly Rwf673 per litre, or about 19 percent of the unsubsidised price.
