Thursday, September 24, 2020

New commuters’ fees could cause an uptick in inflation

As September commences, public transport fees will also go up, a development that has upset commuters amid low fuel costs. The increase is also expected to nudge the country’s inflation rate, which has sunk to record lows.

The Ministry of Transport and Communication in the third week of August announced that public transport fares have been increased. The ministry did not explain the reasons behind the latest hike. The announcement angered public transport users, arguing that not only have prices been slashed for fuel, but the Covid-19 pandemic has already made life harder.

In May and June, Botswana Energy Regulation Authority (BERA) made massive reductions to retail pump prices for petrol, diesel and paraffin, a move that slowed the inflation rate which had grown by a larger pace to 2.5 percent in April, up from the 2.2 percent rate that stretched since December. The sudden upward movement in prices was caused by the 22 percent increase in the electricity tariff that was implemented beginning of April.

The increase in public transport fees is expected to result in a larger increase in consumer prices since the transport group index is largest component of consumer price index (CPI),  which tracks movements of commonly used goods and services, thus providing the inflation rate.  Since beginning of the year, the rate has been below the Bank of Botswana’s 3 – 6 percent objective range.

The monthly inflation report released by Statistics Botswana shows that the annual inflation rate in July was 0.9 percent, same rate as June. This is a record low rate since 1975. The low inflationary environment in the country, extends as far as 2011, marked by consecutive annual decreases. The average inflation rate was 2.9 percent in 2019, down from 3.2 percent in 2018 and 3.3 percent in 2017. Furthermore, inflation averaged 1.9 percent in the second quarter of 2020, lower than the average of 2.6 percent in the second quarter of 2019, accounted for by the decrease in domestic fuel prices in April and June 2020.

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