Saturday, October 31, 2020

4Ds to have an impact on Monetary Policy as inflation rises

When everyone was punching the air with the fall in oil prices that has a bearing on Botswana consumer inflation, the alcohol levy that came into force to curb excessive drinking has spoilt the party.

This week, figures by Central Statistics Office (CSO) showed that the alcohol levy that came into effect in November added almost 2% to the consumer inflation.

With a sharp fall in crude oil price (average $38) inflation was expected to slow as a result, but the 30% alcohol levy spoilt the party.

The CSO figures for November shows that national year on year inflation stood at 15.0% adding 1.9% from the 13.1 % recorded in October.

One analyst last week told Sunday Standard that inflation will go up in November as a result of the levy although the outlook remains positive.

“It is with no doubt that our outlook for inflation has improved and we believe that the downward trend in inflation will continue in the short-term,” Pulafela Isaacs, an analyst with Stockbrokers Botswana, said.

“That being the case, however, we expect inflation figures for the month of November to be slightly higher that the one of September. This is in light of the alcohol levy that was introduced on November 1, 2008”.

The alcohol levy that was previously supposed to be 70% formed part of President Ian Khama’s roadmap in a bid to reduce alcohol consumption. The original levy was revised after representations from brewing community.

“There is, nevertheless, the likelihood that in the short term, the impact of the recent increase in the alcohol levy would outweigh the effect of the recent decrease in fuel price, thus resulting in a temporary rise in inflation,” Bank of Botswana spokesperson Chepete Chepete noted.

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