Inflation figures moved in zigzag bands in the last three months to burst through the Bank of Botswana ceiling for the second time within the period but the business community was optimistic that it would remain within the confines in the long term.
According to figures released by the Central Statistics Office (CSO), the consumer price index edged from 6.8 percent to 7.3 percent in October at the back of food price spike and vehicle prices. Food annual price hike was recorded at 12.9 percent against 12.5 in the previous month while transport’s annual rate accelerated from 4.9 percent to 7.7 percent.
“We hold a long term view that inflation will stabilize around the bank of Botswana target range. That is around seven percent and at the most eight percent,” chief executive officer of Stockbrokers Botswana, Geoffrey Bakwena, said on Friday.
However, the markets were wary of the dark cloud of a possible fuel price increase which is likely to produce second round effects in the general economy. Fuel prices in the international markets hovered around US $ 100 per barrelÔÇöthe figure that was last seen in the 1970s.
Further, on the local front there were also concerns of a possible hike in administrative prices and most possible from the country’s biggest landlord, the Botswana Housing Corporation, in the coming year.
“There are a number of factors that might trigger inflation to go up. That is if government decides to increase fuel prices significantly and BHC decides to increase rentals,” he added.
The government is hedging against fuel price hikes by the petroleum fund but if the fund is depleted, the Department of Energy Affairs can increase prices without any notice.
“We hold the view that inflation will remain at the current levels of seven-to seven and half percent in the long term. In the short term, it might go up,” Hloni Matsela of KBL said Friday.
However, he stated that factors such as drought and crude oil prices, which are spiraling out of control, might put upwards pressure on the inflation rate. Now crude oil prices are at US $ 95 per barrel as against US $ 55 per barrel last year around this time,” he observed.
“We are still in the park but if it goes out of the range we will have to twick some other things,” he added.
As part of instilling confidence in the economic management of the country, the Bank of Botswana has set itself an inflation target range of four-to seven percent. And it is unlikely to change the range in the coming year despite the fact that government might embark in an expensive exercise of civil service salary hike ahead of the 2009 general election.