ACTIONAID PRESS STATEMENT ON LATEST FUEL PUMP PRICE HIKE
FUEL PUMP PRICE INCREASE TOO HARSH FOR MANY ZAMBIANS
1st September 2023
PRESS STATEMENT
FUEL PUMP PRICE INCREASE TOO HARSH FOR MANY ZAMBIANS
We are deeply concerned with the drastic increase in the fuel pump price by the government through the Energy Regulation Board (ERB) effective 1st September 2023.
This increase will adversely affect Zambia’s inflation rate that remains above the targeted upper bound of 9 percent. So far, the Jesuit Centre for Theological Reflection (JCTR) Basic Needs and Nutrition Basket (BNNB) for the month of July 2023 stood at K9,301.2 for a family of five in Lusaka. This is simply indicating a subsequent high cost of living for Zambians.
The latest fuel pump price increment has pushed petrol from K25.57 per litre to K29.42 and diesel from K23.36 per litre to K26.88.
Since the International Monetary Fund (IMF) Board approved the Special Drawing Rights (SDR) of 978.2 million (USD 1.3 billion) in August 2022, fuel prices have effectively increased by 36.5 percent for petrol and 16.2 percent for diesel from September 2022.
We have noticed that this announcement by ERB comes just days after the Bank of Zambia adjusted the Monetary Policy Rate upward by 50 basis points to 10 percent. This measure will reduce money supply and increase the cost of borrowing/financing for Small and Medium Sized Enterprises (SMEs).
ActionAid is cognizant of the current constraints such as the Russia-Ukraine conflict and the depreciation of the Kwacha.
However, we are also aware of the IMF’s condition to implement a cost-plus pricing model that adjusts prices every 30 days, and reinstatement of VAT and Excises Taxes on fuel – both of which have, reduced real household incomes and increased poverty and inequality.
We therefore, call on the Government to ensure the needs of the public are prioritized as they implement the IMF’s structural benchmarks. The government needs to consider balancing the protection of citizens with their macroeconomic stability actions. These increases in fuel pump prices are hurting majority of the Zambian through increased cost of transportation and basic goods.
The boosting of revenue collection through progressive taxation and the effective restructuring of public debt beyond bilateral creditors remain crucial.
We hence urge the Government to ensure that there is an enabling environment for the smooth delivery of social protection programmes particularly in the 2024 National Budget. There is also need for support programmes such as the social cash transfer and NAPSA’s 20 percent pre-retirement withdraw policy to cushion the adverse effects of the current environment.
The Government should truly foster an enabling environment for local SMEs. With fuel being a key factor of production, the monthly adjustment in fuel prices has reduced business’s ability to forecast, plan, and be profitable. The Government must therefore increase the pricing cycle for petroleum products from the current 30 days to at least 90 days (three months).
We further implore the Government to adopt more expansionary monetary options that better enable domestic firms and consumers to access affordable credit for expanding production, employment, and increased contributions to the domestic tax base.
Monetary policy should thus maintain low real interest rates, rather than ineffectively trying to keep inflation low with high interest rates which dampen aggregate demand.
ISSUED BY
Andrew Itai Chikowore (PhD)
INTERIM COUNTRY DIRECTOR - ACTIONAID ZAMBIA