Economy

Opinion: Is The Reduction In Fuel Prices Sustainable?

Zambians have every right to express their dissatisfaction with the reduction of fuel prices that has been made by the Energy Regulation Board (ERB). Petrol has been reduced from K12.5 to K11.67; Diesel reduced from K10.72 to K9.87 and Kerosene reduced from K6.81 to K6.50. The impact that this will have on reducing the cost of doing business is very negligible. From the sentiments that have been expressed from a cross section of society, Zambians expect an adjustment that will lead to a reduction in the cost of living which has risen sharply in the last few years. For a motorist who spends an average of K1,000 per month on petrol, the total saving that will arise as a result of this reduction is only about K66. This is clearly not enough to compensate the sharp increases in the prices of basic food items and electricity that occurred in the first half of 2017. I have no reason to doubt that Minibus & Taxi operators will not even entertain the thought of reducing their fares.

However, we should appreciate the fact that this reduction is proportional to the appreciation of the kwacha in the last few weeks against other major currencies. In as much as the reduction is insignificant, it’s only fair that ERB should pass on this little benefit that has arisen. It is common practice by most traders to quickly increase the prices of their products and services when the Kwacha depreciates. However, when there’s an appreciation, they are usually reluctant to adjust their prices downwards. We appreciate the fact that Zambia is a free market economy and government cannot interfere in the pricing of most products.

Traders are free to sell their merchandise at any price as long as buyers are willing to pay. The laws of demand and supply influence the prices of most products on the market. However, it’s good business practice to pass on the benefits that might arise whenever there’s a reduction in the cost of inputs. ERB has simply passed on the benefit has arisen as a result of the appreciation of the Kwacha.

Any adjustment in the pump price of fuel has a ripple effect that affects almost every aspect of our economy. Therefore, our primary focus as a nation should be finding sustainable ways of strengthening the Kwacha. It is therefore imperative, that government continues implementing policies that will lead to further strengthening of the kwacha.

There are several reasons that led to the appreciation of the Kwacha in the last few weeks. The reduced rate of inflation, monetary policy changes by the bank of Zambia and increase in lending rates that have attracted foreign investment have clearly had a role to play. However, this appreciation is mainly driven by the increase in copper prices on the international market. Our government has absolutely no control over metal prices on the international market. This makes our economy vulnerable to depressed metal prices in the future.

The government should therefore strive to implement policies that will lead to gains that are backed by increased productivity not just in mining but in other key subsectors such as Agriculture and tourism. This is the only way they can guarantee a sustainable appreciation of the kwacha against other major currencies and a meaningful reduction in the pump price of fuel in the long run.

Meanwhile, today, 8th August, 2017, OPEC and non-OPEC officials were holding a second day of meetings in Abu Dhabi to discuss ways to boost compliance with their oil output-cutting pact. The primary objective of these meetings is to boost oil prices that have been falling in the recent past. The Organization of the Petroleum Exporting Countries, Russia and other producers are cutting production by about 1.8 million barrels per day (bpd) until March 2018 to get rid of a glut and support prices. I remain hopeful that the relevant offices here in Zambia are following these developments and making plans on how to mitigate the imminent increase in oil prices in the near future. I ‘am also hopeful that our “able leadership” will not just fold their arms and say “The increase is global”. They will certainly devise mechanisms now, to mitigate the effects of this imminent increase in the not so distant future.

Blessings Kafwanka
Business & Financial Analyst

12 Comments

  1. Sj

    So it is clearly visible that as Zambians we’re good @ cramming theories and extremely bad managers. Hence the sale of mines to foreign Investors. So which Subject/s need/s to be introduced for one to contain power and manage Financial institutions effectively for the benefit of dear mom ZAMBIA. TRUELY speaking the current economy is benefiting few citizens.Comment

  2. Nathan

    Well done

  3. Pleito

    Muletasha bafikala nganafiwama. Not ukulanya ifyakunya apa

    • sj

      Try reasoning with colleges without insulting body PARTS?

  4. Zed Needs Help

    Atleast nga yafikako pali k7.00 otherwise tapali efyo bacitile

  5. Pathias Paul

    We wnt c u winning dats all wat matters most

  6. Mike

    Well done

  7. leonard chibwe

    Comment

    Its a good thing but not beneficial to resident coz transports are not reduced,

  8. Manje

    Gud for u not others

  9. ngulube

    Comment wel done things it will go in road to have u strong (ERB)..

  10. ngulube moses

    good bt transport it is nt reduced

Comments are closed.