Finance Minister Margaret Mwanakatwe has warned that numerous commodity prices are expected to be adjusted upwards following the recent adjustment in the price of fuel.
And Mwanakatwe says it is difficult to predict an exchange rate that you are in not control of.
Speaking to journalists in Lusaka, Wednesday, Mwanakatwe said numerous commodity prices are expected to be adjusted upwards following the adjustment in the price of fuel.
“I think it’s always [good to] bear in mind that we are buying a commodity that is not kwacha priced. It is priced at dollar. So, we always have to find the kwacha to buy the commodity. In buying the commodity, we also bear in mind that the per barrel price of petrol and fuel in general has been going up. If we take ourselves back once upon a time, two years ago, I think it was about US $49 per barrel, it got to US $71 dollars per barrel recently it was US $80. Today, I haven’t checked. So, here is a commodity, which has been rising in price, government has been cushioning the public at large with that increase. But how much more can you cushion? It’s that difficult that’s why we have to put the price up yesterday (Tuesday) to make sure that we are able to have the kwacha to pay for the fuel importation,” Mwanakatwe said.
“The prices on commodities [are] only those that are being impacted by a foreign product. So, for example, if you are producing maize, will your price of maize go up today? No! It shouldn’t because you are growing maize in a field. So, maize shouldn’t go up unless if you are now milling the maize and you are using the fuel that is higher in price than it was before. Then you may, but don’t forget kwacha and dollar are both commodities going up and down. You have had a kwacha that has been stable from January until September, and in September because of various parameters, including the price of fuel and including, don’t forget the dollar has [been] strengthened. So, if you look in the region; you look at Botswana; you look at South Africa; you look at Zimbabwe; all the exchange rates have suffered because the dollar has strengthened.”
She, however, said inflation would not be negatively impacted by the depreciation of the kwacha.
“Look at what is in the inflationary basket. Look at what is in there; there is mealie meal, when you look there, there is fish, there is kapenta. Look in that basket and then look at what is dollar-based, then you can see the proportion of the impact of dollar on your inflation basket. It’s not just petroleum, it’s an array of goods, even your rentals. So, that’s what we need to be looking at. So, depending on how the dollar performs, depending on how the kwacha performs, as well vis-à-vis the dollar, that when we begin to see the inflation impact. We are trying as much as possible to make sure that we have the supply for the private sector that is needing to take out dollars for various things dividends, like produce for their manufacturing, like royalties and things like that. There is normally a bit of pressure towards the end of the year,” she said.
And Mwanakatwe said it was difficult to predict an exchange rate she was not in control of.
“Dollar has strengthened. In the dollar strengthening, we need to ensure that our macros are strong, and we can have a private sector that is producing and a citizenry that is productive to make sure that we can cushion against some of these external factors. So, if the [dollar] comes down [kwacha appreciates], we expect those commodities that are being impacted by the price of the dollar should come down. When I looked yesterday at close of business, the Bank of Zambia rate had come down to below K12.00 [per dollar]. This morning [Wednesday’s] opening, I haven’t seen, but what we are doing as a government together with the central bank is actually helping to cushion the kwacha one of which is supply. It’s law of supply and demand. If the demand is high and supply is low, there will be depreciation. If supply keeps coming, that’s why we are saying let’s be export-oriented and produce those export products that will earn us foreign exchange. Kwacha performance for the rest of the year, I’m not crystal-balling. I’m not crystal balling at all, maybe you can speak to the bankers about that, but I don’t [know if] they will crystal ball as well. It’s difficult to predict an exchange rate that you are in not control of because we don’t produce the dollar,” said Mwanakatwe.