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THREAD ON FUEL CRISIS
1) Fuel is a baseline expense and any increase on fuel pump prices unlocks a spat of prices for other commodities. Chances are in the coming wks we will witness massive prices increases, panick buying, hoarding and the usual things associated with inflation
1) Fuel is a baseline expense and any increase on fuel pump prices unlocks a spat of prices for other commodities. Chances are in the coming wks we will witness massive prices increases, panick buying, hoarding and the usual things associated with inflation
2) The best way in our view was to peg fuel in forex and hence allowing businesses to follow suit and charge thier commodities in forex. This wld have systematically eliminated the bond notes/RTGS as the USD is more attractive from a stability point of view.
3) One wld ask: Where do people get the USDollars when salaries are in Bond/RTGS? Ans: Dollarising will allow circulation of the few dollars we have, gvt will collect revenue in USD, pay civil servants in USD n the USD prices will be more competitive than we witness on Bond/RTGS
4) Admittedly dollarising wld have caused a bit of pain in the short to medium term, BUT it is a much more realistic solution than to hike fuel prices on the basis of an unstable currency (RTGS/Bond). What we did doesnt guarantee economic stability. Infact it can trigger chaos
5) A likely scenario going forward is that prices will increase at an even higher rate than the factor by which fuel was increased. This will trigger a spike on the cost of forex and before we know it the $3.11(RTGS) will be something like $0.30c in USD terms.
