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Fuel price hikes will increase price of goods and services, economists say

by Staff reporter
10 Mar 2022 at 17:34hrs | Views
The recent hikes in fuel prices are likely to have an adverse impact on the economy as prices of basic commodities are likely to increase, the business community has said.

The Zimbabwe Energy Regulatory Authority (ZERA) recently announced that the price of diesel had risen by 17 cents and petrol by 16 cents which was the second increase inside four days after ZERA on March 5 raised fuel prices to US$1,51 for both diesel and petrol.

Energy and Power Development Minister, Zhemu Soda said the increases were a result of international developments, particularly the Russia-Ukraine conflict, which Zimbabwe had no control over.

But the business community has decried the development saying it will destabilize the economy.

Economist, Mr Eddie Cross said, the issue was a worldwide phenomenon which was likely to further boost the inflationary pressures the country is currently operating under.

"It (fuel hike) is going to have a negative impact on the Zimbabwe economy since virtually every product we consume contains an energy element in it so the higher the cost of fuel the more the prices of commodities," said Mr. Cross.

Zimbabwe National Chamber of Commerce (ZNCC) President, Dr Tinashe Manzungu said the hike in fuel prices has a domino effect on the economy as it tends to make production more expensive for business.

"We cannot discount that fuel is an intermediate input for most businesses and the costs are passed on to the consumer and that is affecting consumer price inflation," he said.

Dr Manzungu said the global economy was in the process of recovering from effects of Covid -19 with oil producing nations and this disruption will have negative implications on the global economy.

"The hike will stifle the growth of the economy through the effect of supply and demand as uncertainty is induced. The government has to subsidize the final price to cushion the economy as most basic commodities will shoot in sympathy with the new fuel prices," said Dr Manzungu.

Business Economic Empowerment Forum (BEEF) President, Dr Solomon Matsa said there was no solution to fuel hikes but it was just a burden to the citizens and the world at large.

"Fuel prices are benchmarked in US dollars value, thus if we have some disruptions on some producers or if the American government incurs some costs somewhere that's how it finances all its wars. They are never financed by them but by other nations through such increases," he said.

Dr Matsa also said prices of commodities will certainly go up given that almost 25percent of each commodity price is made up of logistics.

He said some unscrupulous business people will take advantage of the situation and hike prices willy-nilly.

Source - The Chronicle
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