Finance ministry officials hope lower global oil prices will ease financial pressure on consumers by reducing the inflation rate by 10 percentage points
Photo by: Heng Chivoan
Consumers may get some breathing room if lower petrol prices lead to lower inflation.
FALLING fuel prices could nearly halve Cambodia's record-high inflation rate by January, officials said Thursday.
"We hope the inflation rate will drop to 15 percent by year's end and will reach nine percent next year if international crude oil prices stay below US$70 per barrel," Hang Chuon Naron, secretary general of the Ministry of Economy and Finance, told the Post Thursday.
International crude prices hit $69 per barrel on Thursday - a drop of more than 50 percent from July's high of $147 per barrel.
The comments followed a meeting between government officials and representatives of Cambodia's petroleum import companies, where it was announced that petrol prices would drop to 4,000 riels ($1) per liter by Monday.
World oil prices have plummeted on a slowing global economy and declines in demand, and Cambodian pump prices are expected to come down as a result.
Inflation in the Kingdom rose rapidly over the past year with rising fuel costs, and opposition politicians say they are not optimistic that commodity prices will fall as rapidly as the government predicts.
Sam Rainsy Party lawmaker Yim Sovann said the government's inflation projections were unrealistic, as petrol prices in local markets have dropped less than in other countries.
"The government should not expect inflation rates to drop if petrol prices remain stable at over 4,000 riels per litre as they are today, because this rate will not help local products compete with imported goods," Yim Sovann said.
The government has just confused matters with these predictions.
"I don't believe the inflation rate will drop to 15 percent," he said. "I think the government has just confused matters with these predictions, and they continue to conspire with local petroleum companies to keep prices high and out of line with the international market."
Cambodia's inflation rate averaged 22 percent in July and August, according to the Ministry of Planning.
Outside experts, however, put the inflation rate at about 30 percent.
Target in doubt
Independent economist Sok Sina said he expects inflation to fall from current levels, but said that there was no guarantee it would decrease to 15 percent.
"It takes a long time for inflation to adjust because the country does not have full and fair competition," he said.
"But we would be happy to see the rate drop to nine percent next year from 30 percent last year," he added.
He said that inflation is also a symptom of other factors aside from petroleum prices.
"The price of commodities drops slowly, and they only drop when the government forces prices down, as they are trying to do with petrol," Sok Sina said.
"It will only drop faster if there is fair competition and good governance," he told the Post.