Economist Kelvin Chisanga has clarified that many households and businesses are complaining about faster use of prepaid electricity units since the return of 24-hour supply.
In a statement, Monday, Chisanga explained that Zambia’s fuel pricing framework operates on a cost-plus model anchored on import parity pricing.
He noted that within this structure, the exchange rate remains the most influential and volatile component.
Chisanga highlighted that while the model is symmetric on paper, its real-world transmission is often asymmetric.
He stressed that exchange rate depreciation is passed through immediately, driving production costs upwards and creating uncertainty.
Chisanga observed that this uncertainty accelerates repricing across the economy, making depreciation impacts quicker and more pronounced.
He pointed out that, conversely, exchange rate appreciation tends to transmit slowly and incompletely.
Chisanga remarked that inventories priced at weaker exchange rates and rigid cost components dampen downward adjustments.
He indicated that the result is an asymmetric outcome where negative currency shocks are transmitted instantly, while positive shocks are absorbed gradually.
Chisanga underlined that expectations and uncertainty ensure exchange rate weakness is priced in faster than strength.
He explained that this dynamic carries significant implications for inflation management and cost-of-living pressures.
Chisanga maintained that credibility in price adjustments is weakened when fuel reductions fail to deliver timely relief.