Government on Sunday embraced the market’s sentiments that crude oil prices will filter into the domestic economy with the announcement that motorists will pay higher for fuel at the pumps.
“Fuel prices are expected to be adjusted again in line with the rise in fuel prices on the international market and this will further exert more inflationary pressures during the second quarter of this year,” said Gary Guma, an analyst with Motswedi Securities.
“I will not be surprised if domestic fuel prices go up,” added economist Keith Jefferis of Econsult.
Both unleaded and lead replacement petrol were increased by 78 thebe per litre, diesel went up by 63 thebe while paraffin was adjusted by 45 thebe.
ULP 95 was also introduced in the market at P6.28 per litre (Gaborone price).
The retail margin has also been increased by 3.983 thebe per litre (from 43.077 to 47.060).
Government, through the Ministry of Minerals, Energy and Water Resources, said on Sunday that the retail pump prices for petrol, diesel and illuminating paraffin was adjusted following spike in price of crude.
“The price adjustment is caused by increases in crude oil prices internationally,” said the ministry.
The international crude oil prices averaged US$84.82 a barrel during the month of April 2010 compared to US$78.76 in March.
The adjustment added to the consumer miseries, who are still reeling from inevitable Value Added Tax (VAT) increase of 2 percent in April that pushed inflation up to 7.1 percent year-on-year from 6.0 percent in April.
Botswana’s VAT is now 12 percent although it is still lower than its peers in the region, like South Africa at 14 percent.
Inflation is expected to go up in May as the impact of the 30 percent electricity tariffs increases filter in.
“The government will continue to monitor the price of petroleum products in both regional and international markets and make reviews and adjustments on a monthly basis,” added the ministry.
“We will see it (inflation) sticking around 7-8 percent for the rest of the year. Hopefully, as we go into 2011, it will go down,” said Jefferis, the former Bank of Botswana deputy governor.
The Bank of Botswana, however, expects inflation to fall within its 3 percent to 6 percent objective range early in 2011 due to slower economic growth and reduced demand pressures as a result of declining household incomes, due to the public sector wage freeze and the slower growth of government spending.