The recent increase in Zambia’s
Monetary Policy Rate (MPR) to 13.5 percent has raised concerns about the
country’s ability to transition to renewable energy as the energy expert
Christopher Mapulanga has warned that the high cost of borrowing to fund
investments may lead to significant delays in the adoption of renewable energy
sources.
Speaking in an exclusive
interview with the Zambian Business Times (ZBT), Mapulanga emphasized that the
elevated cost of borrowing is likely to make many energy projects prohibitively
expensive.
He said this, in turn, could
prompt energy companies to either cancel or postpone their investments in the
renewable energy sector, slowing down the transition process.
Mapulanga noted that renewable
energy projects often rely heavily on upfront capital investment. “The surge in
interest rates could not only impede progress in renewable energy but also
affect traditional energy projects such as oil and gas exploration, which
require substantial investment.”
Mapulanga explained that the
higher interest rates would result in increased operating costs for energy
companies, ultimately leading to higher prices for consumers. He warned that
the MPR increase could significantly impact the profitability of energy firms
and contribute to sluggish growth in the sector.
“This could slow down the
transition to renewable energy sources, as many of these projects depend
heavily on upfront capital projects, this might also affect traditional energy
projects like oil and gas exploration from getting the necessary
investment,” he said.
Mapulanga said the higher
interest rates will trickle down to increased costs of operating for energy
companies, which will then culminate into the increase of the commodity for the
consumers.
He echoed that the MPR increase
will slow down the profitability of most energy firm and lead to a slow growth
of the sector generally.
