WE WILL STICK TO MONTHLY PRICE REVIEW OF FUEL, INSISTS ENERGY MINISTER
MONTHLY REVIEW OF FUEL PRICES IN ZAMBIA
By Hon. Peter Kapala
We have adopted a monthly review of fuel pump prices in Zambia because it is better than a quarterly review, which lags behind in passing on the benefits onto the users when there is a drop in real costs and international prices. This week, we have seen fuel pump price increases in many countries. But because these countries don’t review their prices regularly, they missed a chance to reduces prices last month when Zambia did.
I wish to assert that there is no intention to go back to quarterly or yearly reviews of fuel pump prices. The country has tried long term review cycles before and we ended up with large fuel price increases and a very large government debt from unpaid fuel bills. This was due to the fact that the government couldn’t sustain subsidies and couldn’t pay suppliers on time. Delaying price reviews doesn’t make the problems disappear. This only compounds the problem, like papering over cracks on a wall.
Whereas some businesses and entrepreneurs are complaining about disruptions in their planning, especially in the short-term, they cannot deny the fact that the same businesses will enjoy instant savings when a reduction in pump prices has to be effected due to a drop in international prices of the commodity or a favourable change in inflation or currency exchange rates.
As a government, we appreciate the fact that the greatest risk to the country, in terms of fuel, is security of supply. The only way we can assure security of supply is to make sure we match – as closely as possible – all movements in the exchange rates and international oil prices. If we don’t do so, we shall then be second-guessing these movements. What will then be prevailing at the pumps will not be real prices but guesswork. And any attempts to pre-empt price movements before they actually occur would result in prices that are excessively high and punitive to the public or too low to the point that someone has to then subsidise the price. This would then defeat the whole purpose of removing subsidies and having cost-reflective tarrifs, prices and fees within the energy sector.
The reality on the ground is that the supply chain and cost-factors of fuel have changed from what they last month or the month before. There is now a war in Ukraine involving Russia. Russia is a major supplier of fuel in the world. This war with Ukraine creates instability in the supply of Russian oil. For example, sanctions have been imposed on Russia by the North Atlantic Treaty Organisation (NATO) members and these sanctions include blocking Russian ships from disgorging fuel at ports in places like the UK albeit the Russian oil itself hasn’t been embargoed. With possible reduction in Russian oil available on the market, it is not surprising that all this has, consequently, led to the increase in world fuel prices. This increase in world oil prices directly affects fuel pump prices in Zambia in a not-so-positive way. Compounded to this is a slight depreciation in the exchange rate of the Zambian Kwacha to the dollar in the last month.
As the New Dawn Government, we are strongly resolute in serving all 18 millions zambians and will not take actions that are seemingly porpular but do not work for the common good and the sustainable growth of the Zambian economy. Be assured that we do pay attention to all concerns but we will always soberly reflect on what is needed to move the nation forward. Monthly reviews are part of that needed blueprint.
It is for this reason that I wish to discount all suggestions that the reduction last month was politically motivated. Anyone who cares to check will see that last month, the Kwacha was slightly stronger and Brent Crude prices were lower.
Good morning.
Hon. Eng. Peter Chibwe Kapala
Minister of Energy
- 2022