There seems to be no respite for consumers regarding the rise in commodity prices following an average 2.2 percent jump in fuel pump price announced by the Malawi Energy Regulatory Authority (Mera) on Tuesday.
The fuel pump price rise normally triggers a reciprocal rise in the price of goods and services, eating a large chunk of consumers’ disposable income.
Analysts have said the continued rise in fuel prices could throw into disarray the assumptions in the Economic Recovery Plan (ERP), rendering ineffective recovery efforts of the country’s ailing economy with inflation currently at 35.1 percent as of January.
Following the pump price raise on Tuesday, petrol is now selling at K714.90 (about $1.83) per litre, a 1.5 percent increase from K704.30 (about $1.80) per litre; diesel has gone up by 1.49 percent to K693.80 (about $1.77) per litre from K683.60 (about $1.75) per litre. Industrial paraffin has gone up the highest by 3.8 percent to K613.90 (about $1.57) per litre from K591.40 (about $1.51) per litre.
Consumers Association of Malawi (Cama) executive director John Kapito on Tuesday that though the raise is minimal, consumers should expect a major raise soon and more economic turbulence in the months to come.
“No Malawian can afford this type of a lifestyle in which fuel prices are going up every month. This [the fuel pump price rise] is creating poverty for Malawians,” he said, blaming the raise on the automatic pricing mechanism (APM) of fuel.
Under the APM, pump price adjustments reflect the changes in the value of In Bond Landed Cost (IBLC) of petroleum products and movements of the kwacha against the dollar.
The Economics Association of Malawi (Ecama) executive director Nelson Mkandawire was not surprised at the raise in the pump price of fuel, arguing this indicates that auto-fuel pricing is at work.
“We have to be mindful that the kwacha has continued to depreciate. If it [the kwacha] was appreciating, we could have seen the price of fuel going down,” he said.
Mkandawire said the raise in the pump price of fuel is reflected in the rising prices of goods and services, hitting consumers the hardest.
Industry sources said the total percentage increase on the final pump prices is low, but very significant changes have been made in the price build.
Free on Board (FOB) has significantly increased by about 17 percent (petrol), 16 percent (diesel) and 16 percent (paraffin). This means that the FOB prices are K412.57 (about $1.05) per litre for petrol, K419.89 (about $1.09) per litre for diesel and K433.23 (about $1.11) per litre for paraffin.
Road levy has been reduced from K47 petrol and K42 for diesel to K12 per litre for both.
Rural Electrification on diesel is now K3.82 down from K 29.66 per litre whereas that of petrol is now at K24.43 per litre.
IBLC loss recovery has been removed completely where the Price Stabilisation Fund (PSF) has been adjusted upwards. The prices are as follows; K30.18 for petrol, K28.99 for diesel and K12.19 for paraffin.