FORMER Bank of Zambia Governor Dr Caleb Fundanga says quick fuel price adjustments are necessary in order to keep the commodity supply chain going.
In an interview, Tuesday, Dr Fundanga said delaying to effect price hikes could cut the supply of fuel.
“These things are always encouraging because when they take long to review, somebody is going to take the cost of the global price adjustment. So usually it is the government which used to take the heat because they were the ultimate owner of Indeni. And if the adjustments are not immediate, then the government has to make goods to allow Indeni to continue operating. But now that private people are importing the refined product, the adjustment has to be quick because those people are not subsidized. So if we don’t change, they will not buy new oil and you will see that at the fuel pumps there will be nothing. So quick adjustment is necessary because that is the only way you can keep the fuel supply going,” he said.
“I know that early changes are not good but in life, things are changing daily. The exchange rate is changing every day, so you can’t expect other things to be static. Obviously, I would be more comfortable if it took a little bit longer to adjust but if you delay, it affects the actual supply. The question you are supposed to ask yourself is what is better, to have the oil or to have no oil because the prices have not [been] adjusted quick enough for the importers to be able to import?”
Dr Fundanga said while the the K2 increment on petroleum products was significant, it was inevitable.
“Obviously we are talking about an increase oft kwacha, it’s quite significant and it’s going contribute to increases in cost of production. Almost everybody uses petrol but this is an external factor which we have no control [over] as a country. It is determined by those developments where whether we agree with the reason they are fighting, we do not have control. In my view, the price of oil has gone up internationally because of this situation between Russia and Ukraine. Normally when there is war there is disruption of supply of things and Russia is a major supplier of oil and gas to Europe. If those people can stop fighting, we would have a more smooth world but they are fighting for whatever reasons and we are the victims. We are far away from the conflict but you see that it can have an immediate impact on all of us who are not even part of the conflict. So that is the reason why we need to have peace in the world,” Dr Fundanga said.
He said the impact of global changes would be more immediate now that Indeni was no longer functional.
“Those days when we had Indeni, we used to look at ‘okay, the last consignment came in so the new consignment will take another three months before it lands in Zambia’. But now, there is no Indeni, which means that the impact probably is more immediate than when we had huge consignments which could last us a few months before a new one reflecting the new price starts to come in. Obviously, we do not have refining capacity in the country. So those things we used to have like we import fuel in one tanker and refine it over a period of time, that doesn’t happen. Now it’s tanker by tanker,” said Dr Fundanga.
“So if they are drawing their refined fuel from South Africa, if the price changes, immediately we will feel it. So that is the only difference it makes. We used to feel it also but eventually after we have finished the current stocks then probably the next consignment would be at a new price. But now the impact of global changes are going to be more immediate than it was the case in the past.”