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Fuel price increase will reverse macroeconomic gains - JCTR

Fuel price increase will reverse macroeconomic gains - JCTR
By Misheck Wangwe
Tue 01 Mar. 2011, 04:01 CAT

THE 12 per cent increase in fuel price will hit the poor who are already struggling to meet basic needs, says the Jesuit Centre for Theolog-ical Reflections.

In a press statement, JCTR programmes manager of economic equity and development Geoffrey Chongo said the increase would also reverse some of the macroeconomic gains the country had achieved.

Chongo said the increased cost of fuel announced by the Energy Regulations Board would further heighten inflationary pressure, and the cost of production was bound to go up forcing producers to increase the price of goods and services, thereby eroding people’s purchasing power.

“Salaries for the majority Zambians are already not meaningful because of high tax rate and low tax-free threshold and therefore any price increase in basic needs that may result from fuel price increase will impact on households negatively. The cost of living in Lusaka for a family of six as reflected in the basic needs basket for January 2011 of K3,019,000 is beyond the reach of many people,” Chongo said.

He said the burden of the fuel price increase would ultimately be borne by consumers, especially the poor who had little or no savings to fall back on.

Chongo said that at the macroeconomic level, the fuel price increase was likely to adversely affect the balance of trade.

He said the cost of production would increase as fuel was the major factor of production and would translate into higher prices of final goods and services, thereby making locally produced goods uncompetitive on the international market.

He said the government should have subsidised the cost of fuel by reducing or removing some of the many fuel taxes.

Chongo said that last year alone the government increased fuel prices twice in a period of four months.

He cited a 15 per cent increase in January and a 13 per cent hike in May before the uniform pricing mechanism was introduced in September 2010 that saw a further increase in fuel prices in certain areas.

He said the government should find a sustainable solution to prevent frequent fuel price increases.

Labels: FUEL, INFLATION, JCTR

posted by MrK @ 3:27 PM