Q FM Africa's Modern Radio
Economist, Lubinda Habazooka has observed that the current monthly review of fuel pump prices by the Energy Regulation Board will easily push fuel prices to K50 per litre depending on the price of Brent crude on the international market.
Dr. Habazooka is concerned that with high fuel prices, monetary and fiscal policy will be rendered useless.
In a statement obtained by Q-News, Dr Habaazoka says with the current fuel price review model, the country risks having fuel shortages and high pump prices.
He says this because using fuel tankers to bring in oil makes the country vulnerable to external shocks and also limits the amount of oil imported to the number of available fuel tankers which cannot sustain an economy of above 5 million people.
Dr. Habazooka says in order to cushion the country to the ever changing prices of crude on the global market, there is need to use forward contracts.
He is therefore proposing that in the short term, Indeni oil refinery should be reorganized and recapitalized and make it creditworthy thereby enable it to get a credit rating so that indeni’s and not government’s creditworthiness is offered to the market.
Dr Habaazoka says after fixing Indeni from a financial perspective, government needs to use Indeni to directly import Co-mingled stock directly from importers using financial derivatives for pricing mechanisms.
He adds that no government interference should be allowed in Indeni and as such, an equity partner should be sought to minimise that risk.