Malawi’s headline inflation has surpassed the Reserve Bank of Malawi (RBM) and the Treasury target for 2021 recent data compiled by the central bank show.
According to the average inflation rates data, half year inflation rate has averaged 8.7 percent, which is 0.3 and 1.3 percentage points above the RBM’s 8.4 percent target and government’s 7.5 percent target respectively.
Financial Market Dealers Association of Malawi (Fimda) president Mclewen Sikwese in an interview observed that pressures on fuel prices and the local unit could impact on pressure.
He said: “The impact of the investor’s inflation expectations on interest rates will push up the yield they will seek from government securities thereby raising the cost of the domestic debt by government.
“This will push up the interest payments the government will face for the financial year.”
Meanwhile, RBM in its recent Market Intelligence Report said the decision to restrain production by the Organisation of Petroleum Exporting Countries, including Russia, is the main source of upside risks to inflation.
The central bank said on the domestic front, although a bumper maize harvest is expected to dampen inflationary pressures, this could be outweighed by the spill-over effects of the rising fuel prices and the the outbreak of the Indian-variant of the Coronavirus.