Inflation pain, as rate rises to 34.3%
Malawi’s year-on-year headline inflation rate for September 2024 quickened to 34.3 percent and the Reserve Bank of Malawi (RBM) has attributed the rise to food supply gaps which is beyond its monetary policy tools.
Inflation, the gradual loss of purchasing power that is reflected in a broad rise in prices of goods and services over time, has increased from 33.9 percent in August, according to the National Statistical Office, largely due to food inflation recorded at 43.5 percent from 42 percent in August.
Reads the inflation Stats Flash in part: “The year-on-year inflation rate for September 2024 is at 34.3 percent, an increase from the 33.9 percent recorded in August 2024.
“Food and non-food inflation rates are at 43.5 percent and 21.8 percent, respectively.”
Speaking in an interview yesterday, RBM spokesperson Mark Lungu blamed the rise in inflation on food supply gaps, which is beyond its monetary policy tools.
He said monetary authorities are banking on government’s maize distribution, which could reduce the pressure on prices.
Said Lungu: “We projected this inflation trend because of El-Nino impact on maize production and that is why we are determined to maintain the tight monetary stance.
“This [the rise in inflation] is mainly emanating from food supply gaps in the Southern Region and as the central bank, there is not much we can do about it.”
In its recent Monetary Policy Report, the RBM said it will continue to tighten the policy rate if inflationary pressure persists.
In a separate interview yesterday, Economics Association of Malawi acting president Bertha Bangara Chikadza warned that if the situation is not controlled timely, the consequences will be severe, including further kwacha weakening.
Chikadza suggested a strong collaborative approach between monetary and fiscal authorities to manage inflation and stabilise the economy, including prudent spending by fiscal authorities by cutting on excessive borrowing, which contributes to money supply growth.
“If monetary authorities maintain a tight policy stance while the fiscal deficit continues to widen, efforts to combat inflation will remain ineffective,” he said.
Consumer rights activist John Kapito decried the current inflation situation, attributing it to continued misalignment of priorities by government through spending on unnecessary things and maintaining a high appetite for borrowing.
He said: “Malawi spends money it doesn’t generate and the appetite to waste money on non-productive sectors is the curse that Malawi suffers from.
“Our advice to those in authority is to cut down on expenditure and borrowing because this continues to worsen our economic recovery and negatively impacts on cost of living.”
Mzuzu University economics lecturer Christopher Mbukwa said Malawi needs to sort out supply side constraints alongside the monetary policy, stressing that maintaining a tight policy does not pay when supply of food is erratic.
In its recent Monetary Policy report, RBM projected that annual inflation will be at 33.5 percent this year from 28.8 percent last year.
International Monetary Fund and Economist Intelligence Unit earlier projected a much higher annual inflation rate this year.