The battle against inflation is still in the early stages and far from over. Since the beginning of the year, the consumer price index (CPI) has appeared ready to decline rapidly a few times only for inflation to intensify.
For instance, a cool down in the consumer inflation that was registered in the month of February 2023 was halted during the month of March, as prices across the economy ticked up at a rate of 9.9 percent, registering a rise of 0.8 of a percentage point. The annual consumer price inflation had eased to 9.1 percent in February 2023, registering a drop of 0.2 of a percentage point from the January rate of 9.3 percent.
The March inflation rate was largely influenced by a rise in fuel prices following an upward adjustment by the Botswana Energy Regulatory Authority (BERA) in late February 2023.
To date, BERA has adjusted fuel prices twice, – with one downward move made in mid-January which was followed by an upward adjustment on the 28th of February. The February 28 review saw unleaded petrol 93 going up by 95 thebe per litre while that for unleaded petrol 95 rose by 92 thebe, retail pump price of diesel 50ppm increased by 56 thebe per litre while retail pump price of illuminating paraffin increased by 72 thebe per litre.
But now latest CPI figures show that during April 2023, inflation clocked 7.9 percent, down from a reading of 9.9 percent in March 2023.
This has brought the question on whether the domestic inflation is slowing at a desired rate. Investment analyst at Kgori Capital, Kitso Mokhurutshe says domestic inflation is still expected to trend sustainably with the 3-6 percent range in the second quarter of 2024 (Q2:2024).
Mokhurutshe however predicts that, without new adjustments, there will be a 200 basis point decline in the rate of inflation which could see it reaching 5.9 percent during May 2023.
“Without any further fuel price adjustments in the near future, inflation is expected to dip within the BoB’s 3-6% objective range as early as next month (May23) due to strong base effects….” says Mokhurutshe.
Kgori Capital says while inflation is likely to fall within the central bank objective range by next month, it will once again increase beyond 6 percent in the last quarter of this year, “as the base effects dissipate”. At its last public address in late April 2023, the Monetary Policy Committee (MPC) of the Bank of Botswana made a forecast that inflation will only get back down to the 3-6 percent range by the second quarter of 2024.