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UPND in dilemma of fuel price pledges, notes M’membe – The Mast Online

The UPND government faces a dilemma on how to deliver on its election promise to cut fuel prices today in light of International Monetary Fund (IMF) conditionality with the net effect of higher fuel prices fuel,” says Dr. Fred M’membe.

Yesterday, in a press release, the President of the Socialist Party recalled that on Tuesday January 25, 2022, the Energy Regulatory Board (ERB) issued a press release informing fuel consumers and stakeholders that following the statement made at the last fuel price review on December 16, 2021, the ERB has migrated to the 30-day pricing cycle for low sulfur gasoline, diesel and diesel fuel.

This means that fuel prices would now be revised every month from January 2022.

Dr M’membe said it is highly unlikely that fuel prices will be reduced ‘during these reviews – they will be increased instead’.

“And it could further stoke public outrage over high living costs. In light of their commitments to the IMF, we see no sensible steps they can take to help lower fuel prices in an effort to to deliver on their campaign promise of affordable fuel and defuse public anger,” he said.

Dr. M’membe said that the price of fuel has a significant weight in the basket of goods and services that are used to measure inflation in the country.

He added that producers of services and goods should also consider the higher cost of fuel.

Dr M’membe said this makes fuel prices a key determinant of the rate of inflation.

“The economy also uses diesel for transport, power generation and the operation of agricultural machinery such as tractors, with a direct impact on the cost of agricultural products. On an individual level, higher fuel prices mean that each of us pays more at the gas station, leaving less to spend on other goods and services. But rising fuel prices don’t just affect the cost of filling up at the gas station. Rising fuel prices have an effect on the whole economy,” he noted.

Dr M’membe said “conversely, when fuel prices drop, it’s cheaper for households and businesses to refuel, and it really lowers the costs of transport-focused industries like trucking. and buses, but it also puts a damper on the domestic fuel industry.”

He noted that in general, rising fuel prices are a drag on the economy.

Dr M’membe also noted that when fuel prices rise, it can be a drag on the economy, affecting everything from consumer spending to bus fares to hiring practices.

“Fuel is an important input for transport, which has a direct impact on households when they drive, but also on businesses that depend on logistics and transport chains. If discretionary spending is hampered by higher fuel costs, this can have ripple effects throughout the economy. A side effect of high fuel prices is that consumers’ discretionary spending declines as they spend a relatively larger share of their income on fuel. Higher fuel prices also mean shoppers will tend to drive less, including in places like malls or malls,” he noted. “All retailers are under even more pressure as they are forced to pass on the higher expenses they are also incurring, which is associated with increased shipping costs for consumers. Anything that needs to be transported could cost more as fuel prices rise. Similarly, many products containing plastics or synthetics are partly petroleum-based. Higher fuel prices also mean higher prices for these materials. Rising fuel prices will negatively impact economic recovery efforts in terms of hiring practices.

Dr M’membe said rising fuel prices will force some companies to reassess their hiring plans, meanwhile, as they are uncertain about the health of the economy.

He said less discretionary spending leads to lower sales, which can impact a company’s ability to hire.

“Many job applicants have to weigh potential positions against the costs associated with travel. Some workers who have been offered new jobs have been forced to turn down the position simply because travel costs to and from work coming back would gobble up such a large percentage of the salary,” Dr M’membe noted.

He added that there is an undeniable correlation between consumer confidence, consumption habits and fuel prices.

Dr M’membe said rising fuel prices are making people more pessimistic about the economy.