Oil price plunge blessing to Zambia-FITCH

The plunge in oil prices this year could be a blessing to Zambia and most  other sub-Saharan African countries which will see the region’s economic growth rise to 5 per cent in 2015.

According to Fitch Ratings estimates, it is for this reason that portfolio investors targeting Africa are now focusing more on oil-importing countries  like Zambia and looking away from oil-exporting countries.

And Dr. Shenggen Fan, director general of the International Food Policy Research Institute (IFPRI), sees both a positive and negative side to the current oil crisis.

Dr. Fan said poor producers and consumers in developing countries including Africa should be able to benefit from this – as long as their purchasing power increases.

He told IPS the recent decline in oil prices will help reduce food prices.

Since oil prices are highly co-related to food prices, high oil prices make agricultural production more expensive and thus cause food prices to increase, he added.

“Now that oil prices are on a downward trend, this is, by and large, good for global food security and nutrition,” he said.

On the negative side, Dr  Fan said some highly oil-dependent countries may not have sufficient fiscal buffers to absorb the falling price of oil.

As a result, governments will have to adjust their expenditures and/or devalue their currency, which could lead to higher inflation.

Both lower expenditures and higher inflation could be catalysts for social unrest, especially when they affect some segments of society that are quick to voice their discontent such as students and unions.

Arezki and Blanchard note that African countries are also vulnerable to falling oil prices in terms of their budgetary oil prices, that governments assume in preparing their budget.

Categorized | Home News

Comments are closed.

Our Sponsor

Jevic Japanese Auto Inspections

Social Widgets powered by AB-WebLog.com.