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The hike in fuel pump prices and electricity tariff are likely to push December inflation to more than 17 percent and fuel economic hardships, a business analyst, Michelle Morel has stated.
Morel opined that: “In a significant development on November 30, 2024, the Energy Regulation Board announced substantial fuel price increases, setting the stage for heightened inflationary pressures as Zambia enters the festive season.”
She said the price adjustments, which saw diesel rising by K2.32 and petrol by K0.97 per liter, came barely a month after the implementation of a 115 percent electricity tariff hike for large-scale consumers.
“This double impact on energy costs signals challenging economic times ahead for Zambian consumers, who are already grappling with a three-year high inflation rate of 16.5 percent recorded in November,” she said in a statement issued in Kitwe.
“The timing of these price adjustments is particularly critical, as the economy continues to battle with drought-induced pressures and currency depreciation.”
She feared that the ripple effects of “these energy price hikes are expected to be substantial.”
Morel observed that the
transportation costs would immediately reflect the fuel price increases, with diesel-dependent commercial transport seeing the largest impact at 7.71 percent price growth.
This, Morel, said would inevitably affect the distribution chains across all sectors, from agriculture to manufacturing.
More further observed that
compounding effect of higher electricity and fuel costs was likely to push December’s inflation rate to between 17.2 and 18 percent respectively.
“This projection considers several key factors: manufacturing costs will rise due to increased energy inputs, transportation expenses will climb across all supply chains, and the general cost of doing business will escalate as companies adjust to higher operational costs.”
Morel argued that current data already showed concerning trends.
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“Non-food inflation accelerated sharply from 12.2 percent to 14.1.percent in November, while food inflation remains elevated at 18.2 percent.
She noted that the monthly inflation rate jumped from 0.8 percent in October to 1.6 percent in November, even before new fuel price adjustments.
Morel said that provincial variations in inflation rates revealed uneven impact of these price pressures. Central Province, already experiencing the highest rate at 21.7 percent , could see further increases, while the Copperbelt Province’s recent jump from 15.3 to 17.8 percent demonstrated the immediate impact of energy cost increases on industrial areas.
“For the average Zambian consumer, these changes translate into a cascading series of price increases across essential goods and services,” she said.
Morel said the timing was particularly challenging as it coincided with the festive season, when household expenses typically increase.
The Bank of Zambia’s recent interest rate increase to 14 percent, a seven-year high, signals serious concern about these inflationary pressures.
However, she said with both supply-side cost pressures and demand-pull factors at play, controlling inflation would require a delicate balance of policy interventions as Zambia moves into 2025.
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