Analysts have expressed pessimism over government’s projection that inflation will ease to 22.3 percent this year, highlighting that high public spending ahead of the elections is likely to keep prices elevated.
Both the Reserve Bank of Malawi (RBM) and Ministry of Finance and Economic Affairs expects inflation, which averaged 32.3 percent in 2024, to drop this year due to improved agricultural output.
However, in its analysis, Nico Asset Managers said risks remain.
Reads the analysis in part: “Inflationary headwinds will continue to linger, arising from fiscal slippages [which trigger money-supply growth and drive inflation], local currency weakness, increases in electricity tariffs and higher government expenditure due to the general elections in 2025.
“These factors will compel the RBM to maintain a tight monetary policy in 2025 but will likely initiate cuts to the policy rate in 2026-27 as inflation falls toward the target and support growth.”
On their part, Economics Intelligence Unit expects the policy rate to fall to 18 percent by the end of 2027, after a significant drop of inflation is realized well after the election year.
In an interview yesterday, Consumers Association of Malawi executive director John Kapito said rising inflation is hurting a majority of people and the economy.
He said: “One wonders why we can continue smiling at these numbers and fail to address the reasons behind the rise in inflation, most of which is our heavy borrowing, careless expenditure and high food prices that can easily be managed with better agricultural policies.”
In his 2025/26 National Budget Statement, Minister of Finance and Economic Affairs Simplex Chithyola-Banda said the 2025/2026 budget has assumed a fiscalised real gross domestic product growth rate of 3.4 percent and average inflation rate of 22.3 percent.
He said as Treasury continues with the recovery process, there is need for concerted efforts to further strengthen resilience against economic challenges that the country is facing as without macroeconomic stability, efforts to revamp it will be futile.
Said Chithyola-Banda: “It is very clear that the budget that focused on recovery, diversification and protecting our economy is much more suited now than ever before.”
Meanwhile, the World Bank, in its recent Malawi Economic Monitor, observed that rising food prices due to weak domestic production, coupled with the continued growth of money supply, will likely keep inflation at or above 25 percent in 2025.
Recently, RBM maintained the policy rate, a key driver of interest rates on loans, at 26 percent per annum.
