Thursday, October 1, 2020

Fuel price increase to halt inflation downwards trend

While the market consensus was that inflation could stabilise within the Central Bank’s target bracket before the end of the year, the recent spike in crude oil price and resultant increase in retail prices could spoil the party.

It was announced on Friday by government that both leaded and unleaded replacement petrol will increase by 40 thebe a litre from yesterday while diesel would go up by 5 thebe a litre and paraffin by 20 thebe.

Last week, a number of local analysts cheered the declining inflation numbers saying it is likely to stabilise within Bank of Botswana’s (BoB) target band of 3-6 percent.

This week, Dr Keith Jefferis, the Managing Director of Econsult Botswana told Sunday Standard the fuel prices adjustment is going to complicate things for the Central Bank.

He expects that the increase will add 0.6 percent to inflation.

“The 40 thebe increase will add around 0.6% to inflation from August, and will make it more difficult to contain inflation within the Bank of Botswana’s inflation objective range of 3%-6%,” said Jefferies.

The Ministry of Minerals, Energy and Water Resources said on Friday that the move to adjust prices was caused by the increase in crude oil prices between June and July.

The crude oil prices that are reacting to recovering global economy averaged US $ 68.61 in July increasing by 19.74 percent.

“The fuel price increase is not unexpected given the recent upward trend in international oil prices,” added Jefferies.

The June inflation figures (7 percent) registered a trending down scenario, with inflation going down towards the Central Bank’s target.

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