‘COVID-19 PUTTING PRESSURE ON ENERGY SECTOR’

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BUUMBA CHIMBULU writes

@SunZambian

THE third Covid-19 wave remains a key threat to growth and could force Government to continue cushioning rising costs by providing subsidies such as in the energy sector to ease burdens on consumers.

Delays in hiking pump prices reflects in part authorities subsiding fuel prices so as to cushion cost impact to end users, according to the Kwacha Arbitrageur Magazine.

Brent crude oil futures has edged higher by two cents to US$73.45 a barrel.

According to the magazine, subsidies indicated a cost that the public sector incur at the expense of productive sectors of the economy.

The magazine indicated that the arbitrage in fuel pricing at the Nakonde-Tunduma border post was a case of consumers taking advantage of price anomalies cross border to ease operational costs which was likely to persist for as long as the disparity continues.

Fuel prices in Tunduma (Tanzania) a border town are K25.23 for a litre of petrol while that at Nakonde (Zambia) is selling for K17.62 for a litre. This has resulted in long queues on the Zambia’s border town side.

“Fuel (petrol and diesel) forms a key input in manufacturing costs as such rising Brent prices on the international markets coupled with weakening currencies is widening consumer burdens of fuel spend and fiscal purses for those still subsidising,” the magazine indicated.

According to the magazine, energy reforms remained critical in Zambia whose pace had been impacted by an array of factors key of which was the Covid-19 pandemic.

However, it indicated, Covid-19 had evidently revealed strains on the public sector from a resource allocation perspective leading to re-prioritisation of resources towards healthcare and other social-economic areas that continue to override the traditional need for market price reflectivity.

“A good example is how central banks have continued to cut or pause potential rate hikes even in times when aggressive currency slides have persisted but for social impact of not overburdening consumers and businesses to induce growth. It’s been a mammoth hurdle for the fiscal side in crisis times. “The energy sector is one economic faculty that has not been exempt especially in the interest of growth as economies shrivelled on the back of the Covid-19 effects with constrained ecosystems,” the magazine indicated.

Energy and agriculture subsidies remain two areas Zambia is yet to address.

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