Prices of fuel, one of the key pushers of headline inflation in the country, went up again on Saturday, heightening fears that the ever-rising cost of living is not about to stabilise any time soon.
This means more hardships for Malawians at a time the inflation rate continues to spiral out of control at 33.4 percent and the cost of borrowing from commercial banks remains prohibitive for a private sector that is withering under the heat of market-driven policies.
The price adjustment comes only three months after the Malawi Energy Regulatory Authority (Mera) announced another rise in November.
It is the fifth since President Joyce Banda came to power in April 2012 and reintroduced the automatic pricing mechanism to determine fuel prices, which is mainly triggered by any movements above five percent to the exchange rate, global oil prices and inbound landed costs of fuel.
A statement released Friday evening, signed by Mera chairperson Lyton Zinyemba, said the price of petrol has gone up from K606.30 per litre to K704.30, representing a 16.16 percent rise; diesel is now selling at K683.60, up from K597.40, which represents a 14.45 percent adjustment, while paraffin is going at K591.90, from K509.90, standing for a rise of 15.98 percent.
Zinyemba said Mera considered recent trends in the prices of global petroleum products and changes in other macroeconomic fundamentals on the local market, among other factors.
He said since the last pump price revision on November 9 2012, Free on Board (FOB) prices—for petrol, diesel and paraffin increased on the international market.
FOB is a trade term requiring the seller to deliver goods on board a vessel, the cost of which does not cover transportation and insurance, among others.
“During the same period, the Malawi kwacha depreciated against the US dollar from K323.90 on November 9th 2012 to K365.16 as noted on February 4th 2013 representing a 12.73 percent loss in value of the local currency,” he said.
Zinyemba said a combined effect of the FOB prices and the exchange rate of the kwacha against the dollar resulted in increased landed costs for petrol, diesel and paraffin by 15.54 percent, 12.35 percent and 11.12 percent, respectively.
Consumers Association of Malawi (Cama) executive director John Kapito on Saturday said the increases automatically mean a rise in the prices of basic and other commodities in the country.
“The implications are coming from the kwacha being floated. The kwacha has been getting weaker each day resulting in the fuel prices adjustment. Poor Malawians will definitely feel the blunt.
“Shortly, the prices will reach K1 000 per litre and this does not make sense in an economy whose prices for goods and services are already up. Someone is telling us that he/she does not care about the ordinary person by allowing the free fall of the kwacha,” said Kapito, who last month led protests against the rising cost of living.