Monday, September 21, 2020

Fuel price hike to push inflation higher

The annual rate of inflation is expected to nudge higher during the month of October, largely caused by a hike in fuel prices during the past weekend.

The effects of Sunday’s decision by the Ministry of Mineral Resources, Green Technology and Energy Security to increase retail pump prices for petrol, diesel and paraffin is expected to put pressure in other sectors of the economy, forcing prices to go up as transporting goods and other services becomes expensive.

Meanwhile the inflation rate continued on its downward trend, falling to its second lowest levels this year during the month of September.

Statistics Botswana released its monthly Consumer Price Index (CPI) on Monday showing that inflation in September was 2.9 percent, a drop from Augusts’ 3 percent. The components of CPI, group indices, were generally moving at steady pace between the two months under review.

The largest price increase was recorded in the Housing, Water, Electricity, Gas and Other Fuels group index which went up 0.4 percent between August and September. The increase was mainly driven by rentals paid by tenants. The Housing, Water, Electricity, Gas and Other Fuels group index, which is the third largest component of CPI, is expected to send inflation rate soaring in the next coming months as the recently adjusted petrol prices are felt across the economy.

Another notable increase, also at 0.4 percent, was registered in the Furnishing, Household Equipment and Routine Maintenance group index. The upward movement was on the back of the rise in prices of goods and services for household maintenance.

Other increases across group indices include 0.2 percent increase in the Health group index, and 0.1 percent increases for the Alcohol and Tobacco index, and the restaurant and hotels index. Other groups remained flat, not recording any increases between August and September.

The Food and Non-alcoholic Beverages group helped stem the tide against rising prices, plunging by 0.3 percent. While its decline was smaller compared to increases of other group indices, the Food and Non-alcoholic Beverages group with a proportion of 16.54 percent of the CPI remains a very influential component of the CPI. Furthermore, with the largest component being the Transport index- accounting for 20.65 of CPI – declining by 1 percent, the overall effect was a decrease in inflation rate for September.

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