The International Monetary Fund (IMF) has said it would be crucial to bring down non food inflation during the next 6-12 months for the current disinflation trend to get entrenched.
In an interview on Wednesday, IMF resident representative Jack Ree explained that this is partly because the food inflation may want to correct its path in the months ahead as the lean period approaches.
He said: “Food inflation generally passes though to non-food inflation, over time, because there are direct and indirect links between the two in terms of production costs. Another important channel is inflation expectations. The rapid path of disinflation that we saw during the last 9-12 months clearly affects how people foresee inflation in the future.
Ree said that the reason that there is a gap between the ‘statistical figures’ and the ‘perceived inflation’ is mainly because of the stickiness of non-food inflation.
He also said Malawians should also not forget that kwacha has been amazingly stable, monetary policy has been tight, and fiscal management has been prudent since last year.
“All these things will work together for the gains in inflation broadening its base from food to non-food,” he explained.
Lately, consumers have been complaining of high prices of goods and services despite inflation slowing down. The country’s inflation as measured by the Consumer Price Index (CPI) hit single digit of 9.3 percent in August, the first time in more than six years.
But during the review period, non-food inflation declined by merely 0.5 percentage points to 12.2 percent while food inflation fell by 1.2 percentage points to 6.2 percent.
The Reserve Bank of Malawi (RBM) had forecast that the rate of inflation will hit a single digit by December this year largely due to easing prices of food, particularly maize.
This year, Malawi produced more than 30 percent surplus in maize owing to good climatic conditions after two successive years of low output due to drought and floods.
Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa is on record having urged consolidation for achievements made towards attaining macroeconomic stability including the easing of inflation by sealing all fiscal policy loopholes and monetary policy potential slippages.
