Written by: Kelvin Chisanga
The marginal increment poised on fuel or petroleum subsector will automatically result in the sharp changes, especially on the cost scales of production and on the delivery processes of goods, works and services, and this will also suddenly trigger an upward adjustment measure across all meaningful economic activities, sad reality is that principally during this season the production of both goods and services turn to slow down, coupled with expectations of fourth wave of the pandemic.
We are all aware by now that the Energy Regulation Board (ERB) has hiked the fuel pump prices on petrol from K17.62 to K21.60 and on the diesel from K15.29 to K20.15, as new prices will now take effect midnight, however, it is commonly agreeable to state that this trend may eventually generate low patterns of economic growth contrary to the current economic directions, especially given the fact that we will be running on an expansionary budget, the fiscal policyholders have given so much on the table in this week (December pronouncements which includes increased wage bill) considering the shape of Zambia’s resource envelope, and to the contrary, we will be running the economy on a contractionary monetary policy stance pegged at 9% for accessibility to credit, in which we are projected to see the fiscal side anchoring macroeconomic stability, with variables regulating within the normal range of targets on fundamentals such as forex and inflation, where inflation is estimated with some good expectations to be within the acceptable forecasts by mid-year of 15%, as it takes edging towards 9% by 2023, and secondly we expect money market patterns to perform normally, also expectations are quite high on the foreign exchange market to contain just within the range of K18 to K19 for this 2022 budget to fully remains functional without seeing it running away from the fiscal target lines on the expenditure columns.
As much as we support the IMF’s cause to aid in stimulating economic process, it is strongly with the background that we should have completed the oil procurement audit so that we could avoided economic leakages, right before embarking on a direct removal of subsidies for fuel, and for the electricity in the wake of making market reflective pricing patterns, which is quite an ideal state of affair where the fuel price were anticipated to take this route, but rushing for it at this time may perceived as a deterrent factor in meeting up with the expected inflation targets all because the economy may slow down during January and February due to seasonal demands on foodstuff, given the situation that a number of critical policies have been given out much attention, practically at the same time for implementation to be done in the financial year 2022.
However, with the Zambian case, we all know that fuel and electricity strongly interplay in the market systems, and are critical component as factors of key production in the supply value chains, the worse scenario case is the anticipation of erratic supply of electricity if the weather for rain patterns does not change to favour us, therefore fostering an increase in energy sector at this particular time, should have been subjected to a case of wait and see method to gauge against certain effects, as the increase will definitely affect wider aggregate demand in the economy especially on both consumption and production areas, following the projection of seeing a steady growth which would have gradually allowed such changes during the course of budgetary function within the projected material year.