Ecama queries Mera’s decision


By Chimwemwe Mangazi:

Economics Association of Malawi (Ecama) has expressed reservations on Malawi Energy Regulatory Authority (Mera)’s decision to maintain fuel prices in the entire first half of the year, describing the development as a recipe for disaster.

Ecama said other factors that determine fuel prices are pointing the opposite direction.


The organisation’s executive director, Maleka Thula, said, with automatic pricing mechanism (APM) being used in determining prices of fuel, depreciation of the kwacha beyond a certain threshold is a concern for the road users.

He said the local currency had recently stumbled against most major currencies, mainly on account of demand and supply conditions in the market at a time global fuel pieces have been increasing.

“With delayed opening of the tobacco market, increased demand for foreign exchange during the period and minimal election effect, the kwacha’s performance was rather weaker than expected in the recent past.


“Since the last domestic pump price revision in January 2019, the kwacha has lost just about 6 percent to date (July 16 2019) and, on month-on-month basis, the kwacha depreciated by 2 percent against the dollar as at end June 2019,” Thula said.

Mera Chief Executive Officer, Collins Magalasi, said the trend could be true but added that the situation had not reached a point where prices could be revised upwards since there is still enough money to caution it.

“I can confirm that, the past six months, we have not changed the prices of fuel. It was not by accident but because we had sufficient funds for stabilisation. This [money] we collected from the pubic when international prices were favourable and it is only fair that, when there is international pressure, we give back to Malawians.

“We can only increase the prices when all the factors such as global prices, and other logistical factors, are high and that there is grave depreciation of the kwacha. Sometimes, the prices may go up but a decrease in insurance and other logistical aspects work to our benefit and we are following the trends on daily basis by the minute and we do forecasts for the long term. So, Malawians should not be alarmed. By the way, we have enough funds in billions of kwacha,” Magalasi said.

The APM holds that, all factors being equal, a change in kwacha against United States dollar or rand by more than 5 percent, fuel pump prices qualify for adjustments to support Price Stabilisation Fund that was set to cushion rapid price changes in fuel pump prices at domestic level.

Currently petro is being sold at K868 per litre, diesel is fetching K874 per litre while paraffin is selling at K710.50 per litre.

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