Maize prices have risen by 40 percent mainly due to the looming deficit occasioned by the combined effects of dry spells and fall armyworms, raising fears on the spike in inflation rate.
A snap survey in the Central and Southern region markets show that the price of the grain, the country’s staple, has risen from K5 000 per 50 kilogramme (kg), or K100 per kg to K7 000 per 50 kg or K140 per kg.
Figures from the Ministry of Agriculture, Irrigation and Water Development show that dry spells and fall armyworms have destroyed about 580 000 hectares of maize crop, or about 40 percent of 1.7 million hectares.
Maize as part of food, has a weight of 50.2 percent in the consumer price index (CPI), a statistical estimate constructed using prices of a sample representative items collected periodically.
Inflation rate, currently at 7.1 percent, has been on the downward spiral for the past year benefiting from low food prices, particularly maize.
The drop in inflation has compelled the Reserve Bank of Malawi (RBM) to cut the policy rate, three times in the past 12 months. The rate is 16 percent.
Because of the drop in policy rate, commercial banks have also cut their lending rates to between 23 percent and 25 percent, giving a respite to borrowers.
An economist, Grain Traders Association of Malawi (GTAM) and consumers have blamed the rise in prices to speculation and hoarding of the commodity in anticipation of a low output this agriculture season.
In an interview yesterday, GTAM president Grace Mijiga Mhango said while it is expected that maize prices rise between January and March, considered lean period, speculation has negatively impacted pricing despite the availability of maize.
“There is information going around that we could have food shortage due to the dry spell and the fall armyworms. As a result, some traders are hoarding their maize thereby creating a temporary deficit; hence, rising prices,” she said.
Consumers Association of Malawi (Cama)executive director John Kapito said it is disappointing to note that government officials are fueling speculation, which is coming at the expense of consumers.
“Some government officials have gone an extra mile encouraging consumers to start buying the previous year’s crop in huge quantities as they fear the next crop will be bad,” he said.
But Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said it is not yet clear what impact this would have on inflation rate.
“Of course food accounts a lot in our current inflation basket, therefore, higher maize prices can affect the trend and have the possibility of slowing or reversing the declining inflation trend we have had,” he said.