Economic disaster as inflation bites hard

• Cost of living goes high, consumers feel the pinch
• February Inflation remained unchanged at 10.6%
• BoB anticipates inflation to rebound to 5.7% in Q3

BAKANG TIRO

editors@thepatriot.co.bw

Botswana could soon experience massive increase on prices of goods given the high inflation rate which stood at of 10.6 percent in February 2022.

Statistics Botswana (SB) in its monthly Consumer Price Index (CPI) has said the annual inflation remained unchanged at 10.6% during period the under review, the same level as in January 2022.

The largest upward contributions to the February 2022 inflation rate came from Transport (6.0 percent), Housing, Water, Electricity, Gas and Other Fuels (1.3 percent), Food and Non-Alcoholic Beverages (0.9 percent) and Miscellaneous Goods and Services (0.7 percent). The inflation rates for regions between January and February 2022 indicated that the Cities & Towns inflation rate rose by 0.1 of a percentage point, from 10.7 percent in January to 10.8 percent in February,” said Statistics Botswana.

Thusang Butale, the Secretary General of Botswana Federation of Trade Union (BFTU), said higher inflation pressure will affect the economy. He said the inflationary pressures rose over the years against lack of the salary adjustments.

According to Butale, the employers have also not been forthcoming to engage on inflationary adjustments as it has been the case in the past, with the latter citing Covid-19 impact on performance.

In the past, Butale said employers would make adjustments of 2.5% or 3.5% to salaries when inflation rate could be at 5% for example. He cautioned that the worst is coming for workers.

“The private sector employees will be most hard hit by the impending higher cost of living. There has been increases on the public transport fares, fuel prices and food prices also increases. It is difficult and there are no salary increment forthcoming from employers,” he said.

Butale said the cost of living is also affecting the public sector employees due to inflation. He added that the majority of private sector workers’ salaries will be deeply affected by the rise of inflation with their take home affected leading to lot of burden of public service employee relatives.

“Minimum wage adjustment was at 8.4% last year but the inflationary pressure has surpassed the adjustment. Food, petrol and other utilities are more expensive and with the recent political tension between Ukraine and Russia, there could be more economic pressures,” he added.

Meanwhile, an economic analyst at Kgori Capital Kwabena Antwi has said they expect the inflation rate which is above BoB range to steadily decline in 2022 due the base effects.

“The main upside risk to our forecast is Transport inflation as global oil prices have continued to rise. Oil prices have risen by 28% year-to-date this year. We expect the BoB to implement at least one 25bps rate hike in 2022 as it walks the tightrope between rising inflation and supporting economic growth,” he said.

According to Statistics Botswana, the Rural Villages’ inflation rate has stood at 10.6 percent in February 2022, a drop of 0.1 of a percentage point on the January rate of 10.7 percent, whilst the Urban Villages’ inflation rate remained unchanged at the 10.4 percent in February 2022.

“The national Consumer Price Index went up by 0.3 percent in February 2022, from the 116.0 registered in January 2021 to 116.3. The Urban Villages index advanced from 116.2 in January 2022 to 116.7 in February 2022, recording a growth of 0.4 percent. The Cities & Towns Index moved from the 116.1 to 116.4, an increase of 0.3 percent, whereas the Rural Villages index recorded a growth of 0.2 percent, from 115.4 in January 2022 to 115.6 in February 2022,” said Statistics Botswana.

BoB Projections

Meanwhile, the Governor of the Bank of Botswana (BoB) Moses Pelaelo has recently said the bank expects inflation to rebound within the 3-6 percent objective range in third quarter of 2022.

BoB anticipates inflation to decline to 5.7 percent to fall within the bank’s objective range. Pelaelo said the increment of the bank rate would not put any hold to the rising inflation rates.

“The decisions taken by the bank’s Monetary Policy Committee Meeting (MPC) are informed by the monetary policy framework tools such as the performance of the economy.  Some of the countries in the region adjusted the bank interest rates. Our economy in terms of recovery is not yet on the position to adjust the rate,” said Pelaelo on why BoB maintained rate at 3.75% during the MPC press briefing last month. BoB said it will be cautious on inflationary pressures.