Life is seriously becoming expensive in Namibia and it skyrocketing further is to be expected.
The price increases that have been seen since the onset of the Covi-19 pandemic have not been witnessed in recent history in Namibia.
What is clear is that Covid-19 did not only turn the health systems upside down, but also had a serious impact on the world economy. The mass lockdowns experienced worldwide, to stop or slow the spread of the virus, had unintended consequences, such as interruption in production of essential goods and created shortages, thereby pushing up prices. The lockdowns also affected the transport of goods with harbours and airports closed, cross border road and rail transport disrupted contributing to worldwide shortage of goods.
With the world still not out of the woods with regards the impact of Covid, Russia’s invasion of Ukraine caused further turmoil to the world economy. The sanctions imposed on Russia by the West meant that oil from one of the world’s top supplier of oil and gas could no longer sell its crude, resulting in serious shortages in the supply of energy, with the consequent rises in fuel pump prices.
Food and energy prices saw their largest jump in recent history. In Namibia we have witnessed the highest pump prices of above 20 dollars a litre.
Basic food prices such as cooking oil has jump from around 45 dollars to 120 dollars, which is an over 260% rise after the Ukraine invasion. Ukraine is one of the main suppliers of cooking oil on the world market.
Covid and the war in Ukraine was certainly a double whammy for the Namibian economy, in terms of inflation and price hikes.
Inflation mainly driven by high transport, fuel and food led to the Bank of Namibia increasing its interest rate to contain inflation.
In April this year, inflation was at a five year high at 5.6 since November 2018, The April inflation, according to the Statistics Agency was driven by electricity and fuel.
According to the Governor of the Bank of Namibia inflation risk to the domestic economic outlook persists and mainly lingers around supply disruptions which may continue to put pressure on food and oil prices.
‘’Going forward, inflation for food and transport is expected to remain elevated and may continue to have a disproportionate effect on the low-income segment in Namibia, and therefore requires continued close monitoring,’’ Johannes !Gawaxab warned.
In addition to inflation for some basic goods not showing any sign of slowing, economists have warned of more interest rate hikes into 2023, following the announcement of a 50 basis points hike this week – the biggest margin in 15 years or since 2007. This means money becoming more expensive – loan repayments on mortgages, hire purchase for vehicles and advances going out.
Food inflation, according to !Gawaxab, will affect the low-income segment of the population ‘’disproportionately’’ – the question is what should be done to shield these people from the effects of high food prices?
It is not only the low income segment of the population – the middle class is also at risk of growing poorer as interest rates go up to pre Covid 19 levels coupled with the general inflation.
There will be no quick fix to the double trouble we are in. Petrol prices are set to go up and electricity prices are also set to rise beginning of next month.
In May the government announced that it would temporarily for three months not increase fuel prices and reduced some levies at the pump. However, they could not keep their promise as the under recoveries were so huge that it had to swallow its words and again increase the price to record highs this month.
The minister of finance said in Parliament this week that the government is currently working on mechanisms to see how best to assist the country in remedying the high food prices. This has been a long awaited intervention and it is hoped that it comes sooner than later so that we don’t see any child dying of malnutrition, as was reported this week.
The situation perhaps calls for the quick and urgent roll out of the Food Bank, but at a wider scale than initially intended.
As part of the interventions, it should also look at the Universal Income Grant, albeit as a temporary relief.
The interventions, according to the minister, are still under discussion and within the next weeks or month an announcement will be made.
We will keep reminding the government about this undertaking to come to the aid of the nation.