- Price stabilisation fund has been depleted
Prices of petroleum products in Malawi, have finally been adjusted upwards effective midnight of 23rd June, 2022 in the wake of price escalation on the international market.
Malawi Energy Regulatory Authority (Mera) CEO Henry Kachaje dropped the bombshell during a press briefing on Wednesday evening in Lilongwe.
Following the development, petrol will now be selling at K 1,999.00 from K1.380, 00 representing a 44.92 percent increment.
The price of diesel has moved from K1, 470 to K1, 920 representing a 30.61 percent
Paraffin has been increased by 29.29% from K956, 00 to K1, 236.00.
The MERA boss justified the increment which he indicated is determined by factors such as the exchange rate of the Kwacha following the 25 percent devaluation from K825.00 to K1031.00 to the US dollar, hence making it expensive to import petroleum products.
Movements in prices on the international market have also necessitated the adjustment and petrol has had a steep increase by 13.8 percent.
According to Kachaje, the Automatic pricing mechanism (APM) adopted in 2012 stipulate that any adjustment beyond 5 percent triggers an increment adding the problem is that Malawi doesn’t have oil reserves but imports the petroleum products and the increases are beyond its control.
“We appreciate that the current change in price is indeed quite big but I can assure Malawians that we have taken careful thought before we came to the current prices because other scenarios that we had actually had figures that were higher than what we have settled for.
“But considering the already tough economic environment that people are going through, we have ended up with a price that we have at the moment. But what we’re going to do going forward, is to closely monitor the movements on the international market and see if indeed we’ll have an opportunity for the prices to stabilize on the international market and most importantly we hope and pray that the value of the local currency the Kwacha against the United States dollar is going to halt and not deteoriate further,” he explained.
Kachaje nonetheless welcomed the re-introduction of importation of fuel products through rail as a positive move arguing, it is reasonably cheaper than by trucks.
“However the Mera boss described the position of the Price Stabilization Fund (PSF) as not healthy noting it has been too depleted to recover the costs.
“With the kind of volumes that we are importing in this country at the moment, probably we need to rethink about the Price stabilisation fund maybe it needs to be increased; because initially we had planned to be having plus minus K5 billion in the fund to help stabilise prices. But as we have seen with the major changes that have happened recently, the value of the fund has been eroded and probably this is one of the key issues that we are going to review going forward,” he said.
To some degree he stated that it has been working as it made the regulator not to adjust prices regularly.
The losses MERA has accumulated over time are in the region of K77 billion in arrears which according to the CEO needs to be cleared.