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Fuel Pricing Stagnation Sparks Economic Concerns Amidst Currency Depreciation

The monthly fuel cost reviews have unveiled a concerning stagnation, causing significant disruptions in trade and investment patterns. The Energy Regulation Board (ERB) opted to maintain November’s fuel prices for the month of December, with minimal adjustments in product categories, notably a reduction in kerosene.

Economic analysts Kelvin Chisanga has expressed alarm over the repercussions of this decision. Mr. Chisanga emphasized that the fuel price model has failed to leverage international cost-driven reductions, resulting in missed opportunities for reduced costs in the local market. 

Unfortunately, any potential benefits from cost reductions have been eroded by the Kwacha’s depreciation, creating a serious misnomer in the supply-distribution chains.

He pointed out that the current fuel review, set today amid an upcoming entertainment and industrial break month, indicates a worrisome trend. The Kwacha’s performance has further complicated matters, hindering the pass-on of cost reductions to the local market.

The economic analyst noted that rapid fluctuations in foreign exchange rates are exerting strong bearing effects on inflation. The resultant spikes in inflation have sustained an upward trajectory, negatively impacting the cost of goods and services. This inflationary pressure is slightly above the desired limit for the inflation target band.

Economist Chisanga attributed these challenges to ongoing instabilities in foreign exchange rate channels, identifying significant risk exposures in the market. The situation is further exacerbated by choppy supplies of forex, creating difficulties in meeting market demands efficiently.

Stakeholders are now faced with the imperative to collaboratively address these economic challenges. As fuel prices remain unchanged for December, there is a pressing need for a comprehensive examination of the economic landscape to identify sustainable solutions. 

Mr. Chisanga is urging a proactive approach to mitigate the effects of currency depreciation and ensure economic stability in the face of ongoing uncertainties.

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