The economic association of Zambia EAZ has cautioned that the increment in electricity tariffs and fuel prices will negate the positive impact of the reduced inflation rate that the nation has been recording lately.
EAZ executive director, Alexander chileshe said that failure to keep an eye on the hikes in the prices of these two components of the energy sector may just prove, retrogressive in ensuring that economic growths that Zambia is realizing, trickles down to the people.
Dr. Chileshe noted that it is important for government to deliberately lay down perimeters to set how high the prices can shoot up in order to protect the poor Zambian and enable them to benefit from the reductions in inflation rate.
He said that the 7.8% that inflation rate has been placed at for the month of June, 2010 is good news for the economy of this country but efforts should be invested in ensuring that money now becomes more valuable in buying terms.
He also challenges government and stakeholders in the economy to invest time and examine the benefits that might come with this drop in the country inflation rate.
Dr. Chileshe has however called government to see to it that there is effective reduction in food prices with the current rate that inflation is standing at.
He said that it is evident that the rate dropped due to the fact that the nation recorded a maize crop bumper harvest this year and therefore food prices should see a reduction.
He said that this will easily help government translate this growth into something tangible for the people.
On Thursday, the the Central Statistical Office (CSO) reported that Zambia’s inflation slowed to 7.8 percent year-on-year in June versus 9.1 percent in May, mainly due to a lower food prices.
Bank of Zambia Governor Caleb Fundanga said last month that Zambia would likely achieve its target of 8 percent inflation by the end of the year despite higher fuel prices and a planned rise in electricity tariffs.
“The (June inflation) decline is attributed to the decrease in some food prices such as maize meal, maize grain, fresh vegetables and dried Kapenta (dried fish),” CSO said in a statement on Thursday.
The CSO also said Zambia registered a trade surplus of 762.9 billion kwacha in May compared with another surplus of 1.1 trillion kwacha in April.
Zambia harvested 2.7 million tonnes of white maize in 2009/2010, beating last season’s harvest of 1.9 million tonnes, to leave a surplus of 1.1 million of the staple grain, according to a government crop survey.
But although food prices have trended downwards, analysts see inflationary pressures from higher power costs, particularly if power utility Zesco is granted a 36 percent tariff increase.
The gsins in reducing inflation may be negated by increaese in energy costs. However we need to discuss ZESCO s inefficiency factor rather than impact on inflation.