Maravi

Zesco’s tariff increment is painful – Dr Kalyalya

Zesco’s tariff increment is painful – Dr Kalyalya
By Chiwoyu Sinyangwe
Thu 29 July 2010, 04:00 CAT

ZESCO’S 25.60 per cent increase in electricity tariffs by Energy Regulation Board (ERB) is painful, Bank of Zambia (BoZ) deputy governor for operations Dr Denny Kalyalya has observed.

However, Dr Kalyalya said despite the move being painful, it was necessary to ensure the country invests in new generation facilities.

Dr Kalyalya said as the economy improved, there was a high chance the country could slip back into acute power shortages experienced in the periods preceding the 2008 global economic crisis.

“The year before we got the crisis, just look at the amount of load shedding that was happening and if the increase happened at that time, everybody would not have questioned this because it was impacting on our lives,” Dr Kalyalya said in an interview on Tuesday.

“So, somehow when that was over, demand came down and load shedding reduced and there, we feel as though it is not necessary to have investments in energy, but really it is a matter of time because the economy is growing.”

He said it was important to take the painful decision of hiking power tariffs to guarantee electricity supply to support further growth of the economy.

“We only realise that is a problem when you don’t have power but it takes time for those new power generation projects to start yielding the intended results,” he said.

“So, it’s painful. There is no question about it, but probably it is a necessary evil to be able to have continued supply of power that we need. Even these things you are talking about like industry, infrastructure, in the end, they will be driven by power. So, do we have enough currently in our set up? The answer is certainly not. We need to grow that. So, it is painful but in the long run to medium term, it should provide us the necessary energy that we require. So, whether it affects our inflation obviously it does in the short-term.”

Dr Kalyalya said the improving kwacha on the back of strong metals prices and high grain output was expected to mitigate inflationary pressures from this week’s power tariffs 25.6 per cent increase.

This week’s electricity was expected to fuel inflationary pressures as energy costs form a critical component in the production lines.

Dr Kalyalya said the recent increase in fuel prices, which would hit hardest on domestic consumers would in the short-term fuel inflationary pressures.

Last month, the country’s inflation rate reduced to 7.8 per cent from 9.1 per cent in May buoyed by decrease in some food prices such as mealie meal, maize grain, fresh vegetables and dried kapenta.

“Obviously in the short-term, it does affect our inflation as it will lead to an increase in prices but our expectation is that there will be other expansive programmes which will dilute the effect of this
power increase,” Dr Kalyalya said.

Dr Kalyalya said the kwacha which opened strongly this week climbing to the
highest level since mid-May and high maize output were expected to cushion the likely inflationary pressures from high electricity tariffs.

“The harvest is just still being offloaded onto the market so to the extent that there is going to be the pressure from the food sector to be able to moderate some of the pressures from the electricity
increase,” said Dr Kalyalya.

“The appreciation of the kwacha has already started. The performance of the exchange rate can help to moderate that impact.”

Labels: DENNY KALYALYA, TARIFFS, ZESCO

posted by MrK @ 11:19 AM