By MAIMBOLWA MULIKELELA –
THE latest edition of the World Bank’s Zambia Economic brief indicates the need for fuel pump prices to be adjusted to fully reflect the cost of supply and help reduce budget pressures.
The report indicates that as Zambia’s economic growth slows down, the trade balance has worsened and substantial funds are required for short-term alleviation of the power crisis, and the reduction of fuel subsidies to provide one of the few quick options for relieving budget pressures.
It further states that a review of the current price settling mechanism is also a priority, as are efforts to fix underlying problems associated with the supply of fuel.
“To beat the slowdown, there is a need to make every Kwacha of Government expenditure count. Any fiscal adjustment should be accompanied by a shift in spending priorities that support the efficiency of public expenditure,” the report states.
It indicates that there has been a mismatch between the pump prices and cost of supply of fuel because of the rapid depreciation of the Kwacha.
Therefore, this leaves the ministry of Finance having to pay the difference.
“There is need to identify and reallocate under-utilised resources to ensure that every Kwacha spent is contributing towards each sector’s objectives,” the report states.
It estimates that fuel subsidies have averaged close to US$36 million per month between September 2015 and May 2016, and electricity subsidies around $26 million per month, a combined total of $576 million, putting huge pressure on the budget.
The seventh World Bank Zambia Economic Brief titled ‘Beating the slowdown: Making every Kwacha count’ was released in Lusaka recently.