Lusaka, January 6, 2020
As consumers stepped into 2020, the latest statistics recorded inflation at an all-time 2019 high of 11.7 percent. According to the Medium Term Expenditure Framework, Zambia’s inflation target rate is supposed to be between 6 and 8 percent however this target was breached as early as May 2019. As we look towards 2020 the Consumer Unity and Trust Society (CUTS) urges consumers to be as prudent a possible in their spending as we anticipate that the cumulative impact of increases in food, power tariffs and fuel prices on consumers will prove to be very difficult.
According to the Zambia Statistical Agency, the largest contributor to the rising inflation was the increase in the cost of food. The food inflation rate for December 2019 was recorded at 15.2 percent compared to 13.5 percent recorded in November 2019. Food constitutes a significant proportion of household expenditure, particularly for low-income households and according to research we undertook last year, an increase in the cost of food results in most households cutting down on either the number of meals they take or their food portions.
As last year drew to a close, the Energy Regulation Board increased the price of both electricity and fuel. This increase was received with much consternation from various stakeholders as both fuel and electricity are key inputs into the production processes of both goods and services within the economy. On this basis we can expect that that following the increase in the costs of production, producers and retailers will be hiking their prices in 2020 in order to shift the burden of the increased tariff hikes to consumers.
To this end we have already begun to see the likes of companies such as Lafarge indicating that they will be increasing their price of cement by 20 percent due to the increase in the prices of fuel and electricity. Further to this, earlier today a hike in the cost of public transportation was approved which have further negative effects on consumers.
In addition to the knock-on economy-wide effect, household incomes will be eroded as both fuel and electricity are key households consumables. Following the increase in electricity tariffs the President indicated that these hikes would have an adverse impact on the poor. Indeed, the expected increase in the cost of living will most negatively affect the poorest and most marginalised households in Zambia. There is, therefore, a need for the government to provide a tangible solution on how it expects to cushion low-income consumers in 2020. Following the increase in current electricity tariffs, we anticipate that an estimated 182 000 people will fall into poverty.
Consumers find themselves in this situation due to the country’s difficult macroeconomic situation. While we saw the Bank of Zambia indeed take some steps to curb inflation there is a need for the government to do more. Due to the country’s fiscal constraints as a result of the country’s growing debt burden, the government is unable to take steps to cushion consumers from the external shocks that are contributing to the high cost of living. As we enter into 2020 we urge the government to articulate how it will seek to address the country’s debt situation which is having a negative spillover effect on the lives of consumers. It is therefore imperative for the government to not only derive and communicate a strategy on how it intends to deal with the country’s debt, but action it as well.
Kindly quote Ms Chenai Mukumba, CUTS Centre Coordinator
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