Fuel price hikes good for the economy.

Fuel Price Hikes good for the economy

_By Zimbo24news Team

12 January 2019

Ndinofarira avo vanoti havazivi kana kuti havanzwisisi.Neniwo handizivi uye handinzwisisi, asi ndine mafungiro anguwo.Saka kana ndataura usashora hako kana kutuka.Here is why I am celebrating fuel price increases.

We are all in business in one way or another, either you trade in commodities or you exchange your labour for survival.In business we face reality and there is little if any rigging.Our economy has been humstrung mainly by currency/price distortions.

Noone can and would want to trade at sub-economic prices.The market had long corrected itself like what Prof Mthuli said in a BBC interview sometime ago as evidenced by a spike in prices of basic commodities.

He said he will let the market self correct.If you observe you will discover that every other sector of the economy had long moved from the official 1:1 rate and real market rates were at play and prices had already gone high to reflect that reality.Only the fuel sector had remained with the artificial exchange rate of 1:1 which is not reflective of the prevailing market dynamics.

Now here came the problem.RBZ could not supply sufficient currency to keep the country oiled , neither do they have the money in local currency to subsidise fuel traders.Fuel traders came face to face with reality each time the were on the market for currency, yet they would be forced to sell at a discount.It is not true that Zimbabweans and any other nationals out there have no money to bring in fuel.

There is plenty of private capital out there but noone would bring in their money so that they trade at a discount or loss.You will discover that plenty of fuel is in underground storage here in Zimbabwe and it wont take a week before all garages are looking for customers.Its there and its bonded.

Noone could release their fuel, sell it at a discount then fail to restock.Now if you compare $3.11 to US$1.24 you get to a reasonable median rate for any business to restock.This is reality Cdes.We cant live a fantasy forever.Never mind the so called inflation.

Whats better buying fuel at the pump for $3.11/L  or buying it at $5/L on the black market or at worst failing to get it ? So dont worry these increases are already built in in the current prices of goods because we had lived and gotten ised to these prices.

Economics thrive on reality.

Now at this price I know Mr Chamba in South Africa is contemplating bringing his shipment home for trade because its now viable.The most important fundamental is to create an environment for industry and businesses to thrive.Subsequently the laws of supply and demand will give us the correct pricing structure.After all who said all inflation is bad to an economy ?

We should just keep our fingers crossed that those measure announced to cution the workers will be sufficient to match or offset these increases.

These price adjustments will see the government increasing its portion in taxes from petroleum trade thereby creating a surplus which could be directed to ofsetting of extra employment costs.

Price distortions in tjeir nature scare away investors.Now if we manage to maintain this rate I have no doubt that it will mark the entry point for the proposed new substantive Zimbabwe local currency whatever it will be called.

This price increase will see individuals offloading their RTGS balances which had become a stumbling block to a smooth crossover to a new local currency.Once these balances deplete or get cleared there will be no conversion risk which would have seen banks go broke overnight.

So still its hats off to President Mnangagwa and Finance Minister Mthuli Ncube