The hiking of fuel pump prices was anticipated and inevitable because of the depreciation of the Kwacha against the US dollar in the past eight months, the Economics Association of Zambia (EAZ) president Isaac Ngoma has said.
Mr Ngoma said in an interview that the level of depreciation of the local currency had a compounding effect on the procurement of oil used to transport goods and services.
“The fuel price hike was anticipated in view of depreciation of the local currency against the US dollar in the last six or eight months.
The depreciation started late last year. The level of depreciation of the local currency means that it becomes more costly to procure the same quantity that was procured due to the depreciation,” he said.
Mr Ngoma noted that fuel was the key component of production system of goods and services meaning that there was going to be upward adjustments to the prices of goods and services.
“What Iam trying to say is that the depreciation of the Kwacha has had a compounding effect, aside other issues pertaining to the procurement of oil, the cost from the source as it was the logistical aspect related to the distribution,” he said. Mr Ngoma noted that the continued depreciation of Kwacha and hiking of fuel prices may attract a rise in the inflation rate.
And Mr Ngoma observed that there were many measures needed to be implemented in helping the Kwacha stabilize, citing Zambia being more inclined to export more as one of them.
“There are a lot of things that need to be considered, one is the depreciation of the currency so we need to be more productive and export more and strengthen the local currency,” he said.
He also said there was need to ensure that the oil procurement system was made more efficient to procure oil from source and cut out the middle men.
“The whole procurement system must be reorganized and made more efficient. Generally, since we are not an oil produce country, the quantities are very few unless we can look at fuel sources, the bio fuels and so forth in the long term,’’ he said.