Inflation rose to 10.6% in January, the highest level since March 2009, driven by an increase in fuel prices as well as revised minibus and taxi fares. Inflation, which is the rate of increase in the prices of goods and services, was recorded at 8.7% in December 2021.
However, the level of inflation in December did not include an increase in fuel pump prices, which were raised by as much as P1.75 on December 20. Pump prices were raised five times in 2021, pushing inflation to nine-year highs by June.
The latest report from Statistics Botswana indicates that higher inflation in January was powered by the Transport group index, which tracks the prices of fuel, commuter fares and vehicle prices. Besides the December 20 pump price increase, minibus fares were increased to P6 from P5 and taxi fares from P6 to P7 on January 1, 2022.
The fare increase came after protests by minibus and taxi operators who said the rising prices of fuel had eaten into their margins throughout the year.
The Bank of Botswana expects inflation to average 10.4% in the first three months of 2022, easing off in later months and levelling out at between three and six percent in the third quarter of the year. The central bank is due to soon unveil its Monetary Policy Statement for 2022, which will detail inflation expectations and the monetary policy position to be adopted for this year.
For consumers, inflation has eaten 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 January 2022, the Transport Index has risen by 26.7%, while food and non-alcoholic beverage prices have increased by seven percent.
Prices of alcoholic beverages and tobacco have risen by 9.7% while the prices of housing, water, electricity, gas and other fuels have risen by 8.1%.
Electricity tariffs are due to rise again in April, while the Botswana Housing Corporation is also expected to implement the second phased increase in its rentals around the same time.