Risks to in­fla­tion­ary pres­sure heighten with fuel price hike

Last the ERB ad­justed prices up­wards was on 12 Feb­ru­ary this year. Brent prices are now 25% higher as the kwacha trades 22% weaker on neg­a­tive sen­ti­ment

Zambian Business Times - - COMMODITIE­S -

Risks to Zam­bia’s in­fla­tion have height­ened as the cop­per pro­ducer ef­fects a long over­due fuel price hike ef­fec­tive midnight of 02 Oc­to­ber. In a state­ment by the En­ergy Reg­u­la­tion Board – ERB, prices will ad­just petrol 16.85% higher to K16.06, diesel 21.98% to K14.65 and Kerosene 28.14% to K11.34 per liter.

Key driv­ers of the ERB’s de­ci­sion were el­e­vated Brent crude prices of USD84.7/bbl. (25% higher than Feb­ru­ary lev­els) in light of a 22% de­pre­ci­ated lo­cal cur­rency ( kwacha) trad­ing for K12.04/USD. Crude is fore­casted to flirt with highs of USD100/bbl. in the not so far medium term, as Oil Pro­duc­ing and Ex­port­ing Coun­tries – OPEC mem­ber states tighten sup­ply to sup­port prices.

The cop­per pro­ducer’s an­nual in­fla­tion for Au­gust broke the Bank of Zam­bia (BOZ) 6-8% tar­get band at 8.1% and marginally paired losses in Septem­ber when it printed at lev­els of 7.9% on ac­count of base ef­fects from the Septem­ber 2017 25% elec­tric­ity tar­iff hike. How­ever, the real risks are an­tic­i­pated in the lagged ef­fects of the cur­rency slide. The kwacha has lost 22% in value year to date as dol­lar de­mand soared in light of neg­a­tive sen­ti­ment and a strong dol­lar en­vi­ron­ment.

The rise in pump prices is ex­pected to cause a spi­ral cost push ef­fect that will push in­fla­tion higher. Other risks to CPI in­clude the pro­jected length­ened dry sea­son that is ex­pected to ad­versely im­pact food prices.

Newspapers in English

Newspapers from Zambia

© PressReader. All rights reserved.