Inflation quickens on fuel price rise

Brian Benza
Staff Writer | Wednesday October 17, 2012 00:00

This means on average general prices of goods and service in Botswana have risen by 7.1 percent between September last year and last month.  According to figures released by Statistics Botswana this week, three group categories recorded significant increases as the annual inflation rose by 0.5 percentage points sailing further away from the Bank of Botswana (BoB) 3-6 percent objective:

'The Transport group index registered an increase of 2.6 percent, from 159.9 in August to 164.2 in September.This was due to a rise in the constituent section index of operation of personal transport, which went up by 4.4 percent. The increase in operation of personal transport section index was attributed to the rise in retail pump prices for petrol and diesel by P0.50 per litre each, which was effected on September 17, 2012.'

Moreover, 'the restaurants and hotels group index rose by 1.6 percent from 196.1 to 199.3 between the two months. This is owing to an increase in the constituent section indices of restaurants and cafes (1.7 percent) and accommodation services (0.6 percent),' said the brief from SB.

Domestic inflation has generally been trending downwards since the beginning of the year, falling from 9.2 percent in December 2011 to 6.6 percent in August 2012.On the back of slower economic activity this year due to lower government expenditure coupled with weakening household disposable incomes, the central bank says it is still hopeful that inflation will fall back to within the objective range before year-end.  However, economic analyst's forecasts are in variance with the Bank of Botswana 's target predicting the year-on-year inflation rate to end 2012 around the seven percent mark on the back of pressure emanating from international oil and administered prices including the recent 5 percent increase in the alcoholic beverages levy.

'The October annual inflation rate is expected to rise further to levels between 7.2 percent and 7.5 percent pushed by the 5 percent increase in the alcohol levy. 'As a result, we project inflation to close the year at levels around 7.0 percent, above the Bank of Botswana 3-6 percent inflation target range,' said a market commentary from stockbrokers Motswedi Securities

In the report, the stockbroking firm reckons that inflation will only reach the objective in 2013 while the central bank will most probably keep the bank rate steady at 9.5 percent at its next monetary policy committee meeting which is anticipated to be held before the end of October.