High inflation rate affects consumers’ income, welfare

For nine months up to September this year, Malawi’s inflation rate has averaged 27.7 percent, a  development that is affecting consumers disposable income.

This could be one of the worst years for consumers as the runaway inflation is eating into hard-earned income, leaving many with non disposable funds.

Hellen Gama, a 42-year old domestic worker in Blantyre, says her salary has stagnated at K50 000 for the past year yet the prices of goods and services have more than doubled, making it difficult for her to make ends meet.

She said: “A year ago, I used to afford fertiliser and some basic necessities for my family back home, but now I am failing to balance my needs against what I earn.”

In an interview on Tuesday, Consumers Association of Malawi executive director John Kapito said this is an indication that consumers are facing serious economic challenges.

He said: “The relationship between the high cost of living and the inflation figures, though not speaking to each other, only shows that the consumer is undergoing serious economic challenges, which is also worsened by lack of access to employment and business opportunities.

“The State does not provide stimulus packages to consumers who are also subjected to various heavy taxes and levies.

“These inflation figures are unrealistic and they don’t reflect the value of this market. It is either we have the wrong basket.”

Inflation, the rate in the general increase in prices of goods and services over a given period  has been on the rise for the past 12 months largely due to increase in food and non-food items.

In the second-quarter of this year alone, headline inflation accelerated to an average of 28.4 percent, from 26.5 percent in the first quarter of this year compared to 19.4 percent during the same period last year.

The outturn was driven by an acceleration in food inflation, which rose to an average of 38 percent in the second quarter of this year, from 31.7 percent during the first quarter of this year. This compares to 25.4 percent recorded during a similar period last year, according to National Statistical Office data.

Meanwhile, non-food inflation moderated to 17.6 percent in the second quarter of this year from 20.4 percent in the first quarter of this year, but was higher than 14 percent recorded during a similar period last year.

On the other hand, the cost of living has been on the rise, with Centre for Social Concerns data showing that as at August 2023, the average cost of living in urban areas for a family of six rose by 25.64 percent from about K307 368 in September 2022 to K386 192 in August 2023.

Despite rising inflation, the minimum wage has remained at K50 000, a situation the Malawi Congress of Trade Union argues needs to be revised to K100 000 to ease the challenges low-income earners are facing.

Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the economic situation puts a proper living wage way above the proposed figure by MCTU, especially with factors such as inflation the worsening.