Consumers Association of Malawi (Cama) Executive Director, John Kapito has agains warned his warning of civil unrest over economic hardships unless government abandon Automatic Pricing Mechanism (APM) following the recent fuel price hike.
Kapito said on Tuesday that the increased fuel price announced by Malawi Energy Regulatory Authority (MERA) would push up costs across the board and said Malawians are squeezed on their necks.
“As long as this Automatic Pricing Mechanism and Kwacha floatation remain, Malawians will continue facing tough times economically. Government has to act hastily and abandon this system if it is to avoid public disorder,” Kapito warned.
Kapito said in no time the country would be awash with demonstrations as the cost of living becomes unbearable, adding government has no money to caution the effects resulting from fuel price rise and non-stop depreciation of Kwacha.
“Expect even those not working and in rural areas to start reacting because the fuel price rise affects the prices of commodities thereby making life harder for ordinary Malawian. First it was civil servants, and now you should expect unemployed too taking it to the streets demonstrating,” he said.
Fuel prices have almost been on a month-to-month climb since May 2012, thanks to the reintroduction of the automatic pricing mechanism (APM) in which the price jump is triggered by any movement of above five percent to the exchange rate, global oil prices and inbound landed costs of fuel.
Fuel is one economic variable that pushes headline inflation (currently at 35.1 percent, according to the National Statistical Office) in Malawi.
Kapito said the pump price hike is likely going to trigger broader inflation in the southern African nation that has already seen protests this year because of the dire state of the economy.
He said the fuel hike will bring more hardships to the already squeezed citizenry.
Economists and other commentators agree that as long as government sticks to the controversial APM—one of the contentious issues government has to stick with to ‘stay the course’ on free market reforms championed by the International Monetary Fund (IMF)—fuel prices will continue rising.
But Finance Minister Ken Lipenga heaps praises of the APM, arguing that the removal of price controls, which culminated into the reintroduction of APM, was a necessary evil to reduce the burden of subsidies on fuel and utilities in the national budget.
He said APM means putting an end to an expensive subsidy that benefits a few at the expense of many.
In a statement signed by Mera’s Chairperson, Lyton Zinyemba, the new prices are effective Tuesday morning (March 12, 2013), attributing the hike to recent depreciation of Kwacha and increase in fuel prices on the international market.
Following the increment, Petrol is now selling at K714.90 from K704.30 representing 1.5 percent rise, Diesel was at K683.60 and now selling at K693.8 a 1.49 percent rise.
Paraffin for industrial use is up from K591.40 to K613.90 while for domestic use remains unchanged.
Between February 4th to March 5th Kwacha has lost value by 7.35 percent. It was trading at K365.16 to US$1 and now is at K391.99.