Govt. raises fuel prices in response to currency weakness

March 5, 2016 9:32 AM

The Authority said it had increased the pump price of petrol by 4.41 percent, diesel by 7.67 percent to reflect the weakened kwacha and a soaring inflation rate.

Motorists pumps fuel into his vehicle in the commercial capital Blantyre in this picture taken March 26, 2012. REUTERS/Eldson Chagara

Malawi increased fuel prices late on Friday, a move that is likely to push up prices for maize in the country where there are already food shortages.

The price increase is partly in response to weakness in Malawi's kwacha currency against the U.S. dollar as well as changes in the cost of importing the fuel.

The Malawi Energy Regulatory Authority said the combined effect of the movement of import prices and the kwacha exchange rate against the dollar had increased the cost of petrol and diesel.

It also revised transport fees and fuel retailers’ margins upwards to allow them to recover their costs to ensure uninterrupted fuel supplies in the country.

The kwacha has come under pressure partly from falling export revenue from the country's main crop, tobacco and general weakness in African currencies due to falls in commodity prices.

Since 2012, the kwacha has lost around three quarters of its value, falling to 720 against the dollar from around 160.

The falls in the kwacha combined with a poor harvest last year has helped to increase inflation to 23 percent from 18 percent in March last year. Food prices have risen putting pressure on lower-income households.

Maize prices in Malawi are already more than 60 percent above the 3-year average for this time of the year, making it increasingly difficult for many people to access food, according to the United Nations World Food Programme (WFP).

The World Food Programme estimates that 16 million people in Southern Africa, over 2.8 million of them Malawians or 17 percent of the country's population, face hunger as the El Nino whether pattern affects crops in the region.