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UPND faces a dilemma of how to honour their election promise of cutting fuel prices

Columns UPND faces a dilemma of how to honour their election promise...

By Fred M’membe President of the Socialist Party

The UPND government faces a dilemma of how to honour their election promise of cutting fuel prices today in the light of the International Monetary Fund (IMF) conditionality with the net effect of increasing fuel prices. On Tuesday, January 25, 2022, the Energy Regulatory Board (ERB) issued a press statement advising fuel consumers and stakeholders that following the pronouncement made at the last fuel price review on December 16, 2021, the ERB has migrated to the thirty-day pricing cycle for petrol, diesel and low sulphur gas oil. And in that regard, fuel prices would now be reviewed every month starting with January, 2022. It’s highly unlikely that fuel prices will be reduced at these reviews – they will instead be increased. And this may further stoke public outrage over the high living expenses.

In the light of their IMF commitments, we can’t see any sensible measures that they can take to help reduce fuel prices in an effort to honour their campaign promise of affordable fuel and defuse public anger. The price of fuel has a significant weighting in the basket of goods and services that are used to measure inflation in the country. Producers of services and goods are also expected to factor in the higher cost of fuel. This makes fuel prices a key determinant of the rate of inflation.

The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce. At the individual level, higher fuel prices mean that each of us pays more at the filling station, leaving less to spend on other goods and services. But higher fuel prices affect more than just the cost to fill up at the filling station; higher fuel prices have an effect on the broader economy. Inversely, when fuel prices fall, it is cheaper to fill up the tank for both households and businesses, and really eases costs on transportation-focused industries like trucking and buses – but it also puts a damper on the domestic fuel industry.

In general, higher fuel prices are a drag on the economy. When fuel prices rise, it can be a drag on the economy – impacting everything from consumer spending to bus fares to hiring practices. Fuel is an important input for transportation, which directly impacts households as they drive, but also businesses that rely on logistics and transportation chains. If discretionary spending is hampered by higher fuel costs, it can have knock-on effects throughout the broader economy.

A side effect of high fuel prices is that the discretionary spending of consumers drops as they spend a relatively larger portion of their income on fuel. Higher fuel prices also mean that shoppers will tend to drive less – including to places like the mall or shopping centers.

All retailers are further squeezed as they are forced to pass on the higher expenses they also experience, which are associated with increased shipping costs to consumers. Anything that has to be transported could cost more as fuel prices rise. Likewise, many products that contain plastics or synthetic materials are based in part on petroleum. Higher fuel prices mean higher prices for these materials too.

Rising fuel prices will negatively impact efforts at economic recovery in terms of hiring practices. Rising fuel prices will force some businesses to re-evaluate their hiring plans, holding off because they are uncertain about the economy’s health. Less discretionary spending results in decreased sales, both of which can influence a company’s ability to hire.

Many job candidates have to weigh prospective positions against the costs associated with the commute. Some workers who have been offered new jobs have been forced to turn down the position simply because the costs to get to and from work would eat up such a large percentage of the salary.

There is an undeniable correlation between consumer confidence, spending habits, and fuel prices. Increases in fuel prices makes people feel more pessimistic about the economy.

January 28, 2022

19 COMMENTS

  1. Crude oil price has risen to $90 per barrel so don’t politicize something beyond the control of the new GRZ.

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  2. @1: Zamani stop the nonsense. Your stup1d government knows how fuel is managed at the market, I mean that your government knows everything that is involved to get the fuel to Zambia but you went ahead and promised innocent Zambians that you will reduce fuel price to K5.

    Stop talking about the price of crude oil going up. New dark government is full of l1ars and hypocrites. People don’t forget. Everything you promised the Zambian people is on record.

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  3. We would like to remind all our (UPND and IMF) competitors that to avoid is to grossly misrepresent GRZ.

    That’s what happens when political parties put themselves before GRZ.

    The UPND administration is in a downward spiral because of their campaign promises. When they decide to embrace GRZ they are not going to have a difficult time to appoint a diplomatic mission team. We are all Zambians and deserve a chance to serve our country.

  4. The whole article can be summarized in one liner taken from his article, where he say and I quote “The price of fuel has a significant weighting in the basket of goods and services that are used to measure inflation in the country.”
    On 27/01/2022, we all saw this heading “Zambia’s Annual inflation rate continues to trend downwards” and none of the Opposition including Mmembe did NOT refute or question the down trend. Meaning the Opposition accepted that the current inflation rate of 15% does reflect the FUEL increases done last month. If that is the case, then this article is NOT serving any purpose, and the content is just good for NAY sayers or noisemakers….

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  5. Inflation is misunderstood a lot. What is the meaning of 15% rate. If it was at 20%, it means a loaf of bread that should have increased to k12 from K10 will only increase up to k11.50 . It does not mean bread price will not increase. Zambians are expecting decreased prices. In short, citizens are expecting negative xxxx inflation.

  6. The Lusaka Times are clearly a Socialist Party fan. And they like the endless chatty stup!d articles of Fred M’membe. For me the petrol prices should DOUBLE in price immediately. I have an electric car, charged by my solar installation at home, and price increases on fuel or Zesco don’t affect me!

  7. Honest, well put. Inflation is the rate at which prices increase. When inflation is dropping, it means prices are increasing slower than before. Inflation is not the price of goods and services, but simply the rate at which they are increasing. Deflation is the opposite of inflation. It’s the rate at which prices are reducing, which Honest above, refers to as negative inflation. So the reality is that a decline in inflation rate does not mean a reduction in the price of goods and service, but simply means that the rate at which prices are increasing is slowing down. Hope this helps

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  8. No corruption shut your smelly ugly mouth you f00I. You are in power and yet you complain and blame others for your failure. I will beat you up. Come visit me . You know where I live here in lsk
    Meanwhile I just want to say thanks to my well wishers and supporters who send me messages and letters everyday. You make me feel positive and humbled to know that you have my back. Below are some messages I received recently;
    1)Kz you are missed and we pray you bounce back
    2) kaizer we regret voting in that disappointment bally. I will vote pf next time
    3) I am not after your money sir just wantd to say kabwata is going to pf. We always vote pf
    5) boss you are millions time better than that snakl boy Anthony bwalywa

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  9. Inter provincial bus fares and Transport costs without a communal fast systems and convenient could become very costly already for an average rural Individual some are paying s high as 250 to 750 to reach places which before could have been below average People already are failing to travel because of increaments in transportation costs A gradual partial soft approach at the same time working the Infrastructure s and economy could be a soft landing We are developing and our per capital income is weak and small to meet those necessary up there The question is how would you now correct this pathway

  10. Most of us who travel knew that the price of fuel in Zambia at K 16 was among the lowest in the region. But UPND and HH knew otherwise, telling Zambians that should UPND form government the price of fuel would come down to K 12. As a Zambian all I am asking HH, is to keep his campaign promises. Or am I to understand that HH made promises which were not based on facts on the ground .

  11. Iwe ka Freddi pala mumutu, how long did the fuel mess at Indeni take in which you were quiet abt. So even now, shut up! Shoosh!

  12. Interesting comments. The problem with some of you bloggers including one who claims to have an electric car, is that you forget that despite you not feeling the pinch, our brothers and sisters, parents and grandparents, nephews and nieces, sons and daughters who are the majority of the poor, are feeling it. Lets not even play games here. When the price of fuel goes up, it affects everything from household goods, to food, transport, electricity, water etc. You UPND blind cadres, can hate everyone who is a concerned Zambian. Not all of us belong to the PF or other opposition political parties. But we are feeling the pain as ordinary Zambians taking care of our poor family members and friends.

  13. @ Honest ,
    @ James,
    Absolutely, and i gave the same bread example yesterday when someone here commented that, what was the point of having downtrend in inflation when prices were rising. It also means that, because the increase in fuel is already accounted for in the 15%, what needed to increase as aftermath has been increased, so for now, as long as the inflation will be trending downwards to 1 figure digit, we shouldn’t expect drastic increases as the opposition is trying to potray. The better term will be that we could be reaching price stabilization.

  14. For many people it’s a compounded thing both inflation and unmployment which needs to be paid attention to because This MISERY INDEX if unaddressed on its key economic issues and policy the Government that was voted with so much hope and trust will lose quickly the support So it’s not a commentary issue or political rhetoric but people and governance. //closed

  15. Hey #2 Henry you’re the one with nonsense.So you expect oil marketers to buy it at $90 then sell it to you at a loss?

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