Zesco tariff increase predicted

By BUUMBA CHIMBULU

THE potential increase in electricity tariffs and the possible reintroduction of Value Added Tax (VAT) on petroleum products may put upward pressure on energy costs and subsequently input costs for manufacturing,” the  FNB Zambia  has stated in its monthly agribusiness bulletin.

Inflationary pressures are expected in the second half of the year as base effects start to unwind and as the nation moves into a new summer agricultural season at higher fertiliser prices.

This is according to the First National Bank (FNB) Zambia which expects to see more pressure on food prices during the second quarter of 2022.

The country’s current inflation rate for June stands at 9.7 percent.

According to FNB Zambia, base effects and currency appreciation had continued to underpin the disinflationary trend.

Base effects, it stated, represented the numerical benefit that arose from having a high reference point when comparing percentage changes between two periods.

“Given that inflation peaked at 24.6 percent last year in July, we expect base effects to continue for at least an extra month before bottoming out. The appreciation in currency has been key in moderating the impact of rising global energy and food prices domestically.

“Further, the nation’s self-sufficiency in key food items has also played an important role in mitigating the impact of the global food inflationary trend,” it stated.

It indicated that the deceleration in inflation continued for another month with the headline number for the month of June being reported at 9.7 percent from 10.3 percent in May.

Though trending lower, it stated, it was worth noting that price levels are still moving higher albeit at a slower pace.

“For better context on the movement of price levels, we note that on a month-on-month basis price levels have increased by 0.9 percent from May to June.

“This is largely in keeping with the month-on-month trend which has been moving upwards since the turn of the year by an average of 1.32 percent – relative to the average month-on-month level of 0.3 percent through the last six months of 2021,” FNB Zambia said.