ENERGY Institute of Zambia (EIZ) chairperson Johnston Chikwanda says the kwacha’s depreciation against convertible currencies has cast a dark cloud on the country’s chances of benefiting from low oil prices on the international market.
Chikwanda, however, says despite the steep exchange rate, the government should find a way of passing on the benefit of the low prices to consumers.
In an interview, Chikwanda said Zambia has been robbed of the opportunity to benefit from low international fuel prices due to the state of the kwacha.
“You know we have a very awkward situation as a country and also as a continent in the sense that the prices on the international market have really tumbled…and they will remain low for the rest of this year according to forecasts and only countries with better performing currency index are benefitting from this opportunity and so as a continent and as a country, we have been robbed of the opportunity to benefit from low international prices, by and large because of the deteriorated state of the local currency. The exchange rate is casting a dark cloud over our prospects of a better pump price, it’s casting a dark cloud, at K18 and it’s very steep, it’s very, very steep…but surely, we have to find a better way of maybe seeing how, I don’t know, even if it’s a one percent or a five percent benefit to the people, hopefully it can be squeezed out as we come to this price,” Chikwanda said.
“What happens is that you have to check how far the price has fallen on the international market and how far the exchange rate has also performed; how far has it fallen or how far has it gone up? So that gap between the two fundamentals, that is what is used to determine whether the price should be increased or the price should be reduced or maintained, so we are keeping our fingers crossed and we are hoping that this time around, the potential to pass the benefit to the people could be tenable because what was procured, was procured at a price that was quite compared to even where the price is now.”
He, however, noted there is need to review whether there is still need for customs duty waivers for importers of fuel because prices in the region have gone down.
“And so it’s a very difficult situation that we are in but what I could maybe advise is at the moment, the refinery is down and the crude oil is not coming in so we have got a number of oil companies that are bringing fuel into the country who have been given a waiver on import. A number of them are bringing in from the region, so the region where they are bringing from, the prices are quite low so we need to verify the customs duty which we waived, whether it is still valid to waive or it shouldn’t be waived so that we can test whether what we are buying from the region can still land at an affordable price even without further incentivizing them,” said Chikwanda.