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Botswana: Inflation stays put at 13-year high

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The rate of inflation remained at 10.6% in February, unmoved from January, with marginal price movements of various goods and services between the two months, a Statistics Botswana report released today indicates.

 

The current inflation rate represents the highest level since March 2009 and has been driven by a range of increases in administered prices last year, in particular, fuel prices which rose five times in 2021.

 

In its last review in late February, the Bank of Botswana (BoB) said inflation is projected to fall from the second quarter of 2022 and revert to within the target range of between three and six percent, from the third quarter of 2022.

 

“This would be mainly on account of the dissipating impact of the upward adjustment in VAT and administered prices during 2021, from the inflation calculation,” BoB governor, Moses Pelaelo said. “Together, these contributed 5.9 percentage points to headline inflation in 2021.”

 

 

The governor however said the risks to the inflation outlook were skewed to the upside and include a potential increase in international commodity prices beyond current forecasts, the persistence of supply and logistical constraints due to lags in production, geopolitical tensions and an uncertain COVID-19 profile. In addition, domestic risk factors relating to regular annual price adjustments, short-term unintended consequences of horticultural import restrictions and the second-round effects of recent increases in administered prices, could push inflation beyond current forecasts.

 

Fuel prices, in particular, are already under pressure as the Russian invasion of Ukraine has led to the spiralling prices of global crude oil prices. The Botswana Energy Regulatory Authority last week said even before the recent jump in global oil prices, local pump prices were significantly below the cost of importing the commodity, despite the series of upward reviews last year.

 

For consumers, inflation ate into disposable incomes throughout last year and weakened their ability to rebound from the COVID-19 induced economic distress. According to Statistics Botswana’s latest data, in the 12 months to February 2022, prices associated with the operation of personal transport rose by about 44%.

 

Over the same period, food and non-alcoholic beverage prices rose by about seven percent, while within that, prices of oils and fats increased by 28.4%.

 

Meanwhile, electricity tariffs are due to rise again in April, while the Botswana Housing Corporation is also expected to implement the second phase increase in its rentals around the same time.

 

Source

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