Anxiety over spike of utility prices in Zimbabwe

 Anxiety over spike of utility prices in Zimbabwe

Anxiety over spike of utility prices in Zimbabwe

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Zimbabwe’s experts are concerned over the continued spike of utility prices experienced over the past few months piling pressure on consumers. Toll and transport fares also increased substantially in both ZWL and USD terms, contributing to general price increases on the market. City Council water rates has also gone up since the beginning of the year. On March 5 2021, government hiked fuel prices early this month evoking backlash from retailers lobby group.

Confederation of Zimbabwe Retailers this week said the new prices were exerting misery on already struggling companies and consumers reeling from the effects of Covid 19. “Reference is made to the recent fuel prices announced by the Zimbabwe Energy Regulatory Authority effective March5. In US$ terms the price of diesel spiked toUS$1.32from US$1.27 per litre and petrol prices increased to US$1.30per litre from US$1.26,” CZR president Denford Mutashu said.

“While in ZWL$ terms diesel went upto ZWL$110.41perl itre from ZWL$105.58 and petrol shot upto ZWL$109.17 per litre from ZWL$104.82.With the economy reopening from a month-long Covid-19 lock down measures the new prices will pile pressure on the already struggling companies.”

Mutashu said he believes the prices are unjustified especially in US$ terms adding that CZR fears the latest increases will push up the cost of doing business which leaves retailers with no option but to pass on the costs to the hard pressed consumers. He urged government to be considerate and review some of the taxes on fuel which has made it more expensive in Zimbabwe than other regional countries. Economist Takudzwa Chisango said the development has a cost push factor and thereby going to see upward price adjustments of various goods and services in the   economy.

“Its also quite unfortunate that we’re seeing these increases from  parastatals out of all institutions. In economic policy, government institutions ought to  lead the way in directing  and complying with policy in the market,” he said.

“The price increases are  negating exchange rate movements being experienced which should be reflecting in price stability. This behavioural practices by these parastatals is increasingly making the formal exchange rate defacto. The tragedy at hand is that all market players will discard the formal exchange rate movements, which many are already doing so, thereby opening a huge pandoras box of inflation in the market.”

In its latest report released this week covering February to September 2021 UNITED States Agency for International Development, food insecurity information portal Fewsnet acknowledges the increase in Petrol and diesel prices in ZWL and USD terms increased by around 5% in February after a series of increases in December and January.

From December to January, diesel and petrol prices had increased cumulatively by 23 and 2 percentage points, respectively.

“The cost of government-subsidized public transport fares increased by between 90 and 100 % in January. Electricity and other utility tariffs have also gone up, impacting mostly the urban poor, some of whom are now forgoing these expenses to focus on food purchases,” the Fewsnet report reads.

“Poor macroeconomic conditions are expected to prevail throughout the outlook period marked by the continued high annual inflation rate. The government has projected annual inflation to close the year at below 10 %, which most independent analysts have dismissed as too optimistic.”

According to Fewsnet while fuel shortages are unlikely during the outlook period; however, based on recent trends, fuel price increases are likely to continue, both in USD and in ZWL adding that  this will likely increase pressure on transport costs and drive price increases of goods and services, putting further pressure on staple foods.

Fewsnet said  government has indicated plans to introduce higher denomination notes of the ZWL to help alleviate local currency shortages; however, some sectors fear this may fuel inflation if large amounts are introduced.

It said  relative stability in the official foreign currency exchange auction system is anticipated; however, parallel market rates are expected to remain somewhat volatile at least 25% above official rates.

Fidelity Hamilton Mhlanga

Fidelity Hamilton Mhlanga has been writing finance and business news over the past 5 years. He earned a BSC in Media and Society Studies and Masters of Development Studies from Midlands State University, in Zimbabwe. He follows mining, insurance, banking and energy stories. He is passionate about development and growth.

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