Maravi

EAZ doubts single digit inflation rate

EAZ doubts single digit inflation rate
Written by Kabanda Chulu and Fridah Zinyama
Thursday, November 13, 2008 6:02:11 PM

THE Economics Association of Zambia (EAZ) has observed that it is unlikely for Zambia to end the year with a single digit inflation rate because of many factors against its attainment.

Earlier this year, the government set economic targets such as ending the year with both inflation rate and gross domestic product growth rate at seven per cent.

And on Tuesday, finance minister Ng’andu Magande said the country was on course to meeting all the set economic targets especially that global fuel prices, which were the main obstacle, have reduced to about US $ 60 per barrel.

But the EAZ noted that there were many factors that outweigh Zambia’s attainment of its economic targets than those that would contribute to its achievement.

It cited the uncertainties surrounding the global food supply and the continued price increase of food such as maize meal on the local economy.

Other variables cited that would have a huge impact on the attainment of the targets are the cost of energy which is still rising for both fuel and electricity and also increased government spending towards last month’s presidential election which contributed to high inflationary pressures. The Central Statistics Office (CSO) data for October quotes the country’s annual inflation rate at 15.2 per cent, an increase of 1.0 percentage point over the September figure.

“It is unlikely that Zambia will end the year with a single-digit inflation rate because the cost of energy is still rising and Zesco seems to be working on an upward adjustment of electricity tariffs and though there was a slight reduction, fuel prices have been going up almost every quarter at least and there is also uncertainty surrounding food supply world-wide and prices have been on the increase,” EAZ stated.

It stated that a close examination of most of the basket of goods used to compute the Consumer Price Index reveals that it is unlikely that prices of any of these will go down significantly in the short-term to bring inflation down to a single digit in the next one month.

“Even the most optimistic picture indicates that inflation may go down by one or two percentage points by the end of the year, but unlikely to hit a single digit by end of December 2008 and government can further reduce inflationary pressure through restraining the fuel cost increase by reducing fuel tax and by revisiting the cost plus formula,” stated the EAZ.

The Bank of Zambia recently stated that the government's removal of subsidies on domestic fuel prices and the global food crisis were threatening the attainment of the seven per cent annual inflation target.

The BOZ noted that inflationary pressures would arise from several factors that included the increasing global oil prices, the government's removal of subsidy on domestic fuel prices and the 15 per cent wage increase for civil servants.

Labels: EAZ, INFLATION

posted by MrK @ 6:04 PM