RBM sees rising fuel prices in Q4

The Reserve Bank of Malawi (RBM) has projected domestic fuel prices to be adjusted upwards this quarter (October to December 2023) on account of rising global fuel prices and depreciating exchange rate.

In its underlying assumptions for maintaining the policy rate at 24 percent and projecting a 1.9 percent growth in 2023, RBM said the exchange rate will continue to depreciate.

The bank also projects Brent oil prices to average $93 per barrel in the period under review, up from $84.5 the previous quarter.

This, the bank said, in addition to the protracted foreign exchange shortages, “could derail the expected disinflation”.

On Monday, Malawi Energy Regulatory Authority chief executive officer Henry Kachaje said that an appropriate determination will be made in due course.

He said the Price Stabilisation Fund (PSF), a fund created to absorb fuel price volatility, continues to “function well, with monthly collections of about K4 billion”.

For the 12th straight month, the energy regulator has kept the retail pump prices for both petrol and diesel at K1 746 ($1.6) per litre and K1 920 ($1.7) per litre, respectively.

During the review period, the Malawi kwacha has depreciated by 9.9 percent against the dollar and inflation rate has been steadily rising.

Currently, pump price adjustments, according to the automatic pricing mechanism, reflect changes in the value of In-Bond-Landed-Cost (Iblc) of petroleum products and movements of the kwacha against the dollar.

To minimise the impact of frequent fuel price fluctuations on the international market, the automatic pricing system links pump prices to procurement costs and exchange rate movements with a plus-minus five percent of trigger band.

This means that any change in Iblc of more than five percent threshold should trigger a price adjustmen.