Malawi inflation slows down further to 31 %

Malawi’s year-on-year headline inflation rate for the month of May 2013 has further decelerated to 31.0 percent from a rate of 35.8 in April, anchored by the availability of cereals on the market and the downward adjustment in the price of fuel, the National Statistical Office (NSO) has said.

This is the third time Malawi’s inflation rate—the rate at which the general level of prices for goods and services is rising—has registered a decline this year beginning the month of March.

The continued ease in the general price level comes amid kwacha appreciation-an increase in the value of the kwacha currency with respect to other major foreign reference currencies-mainly attributed to the inflow of foreign exchange from tobacco, Malawi’s main export commodity to date.

Thus, the slowing down in the rate of inflation should be a relief to consumers as their disposable income-money available for spending and saving after income taxes have been deducted-would relatively buy as much basic commodities than before.

But in an interview on Friday, an economic commentator Mathias Kafunda, who is a programme officer in economic governance at the Centre for Social Concern (CfSC), warned that consumers should not expect immediate cuts in the prices of goods and services in the wake of declining inflation rate.

Said Kafunda: “When inflation rate is declining, it simply means prices of goods and services are increasing but at decreasing rate and when it is high, it means inflation is increasing at an increasing rate. But we should not expect prices will decrease immediately.”

He also said with maize weighing heavily in the consumer price index (CPI), it is not surprising to see headline inflation rate tumbling since maize availability is high on the market.

Following the rebasing of the consumer price indices (CPI) to 2012 using updated household expenditure patterns derived from the 2010/11 Integrated Household Survey(IHS), food contribution stands at 50.2 percent from 58.1 percent, but still dominates the CPI weight.

With tobacco marketing in progress, the economy has accumulated increased foreign currency which he said is easing pressure on prices of imported goods and services charged by importers of those goods.

Finance Minister Ken Lipenga said when he presented the 2013/14 budget that although, the country’s inflation peaked at a high of 38 percent in February 2013, it was pleasing to note that inflation rate has started declining.

“Already by March 2013, headline inflation had started responding to our measures and eased to 36.4 percent, due to a tight fiscal and monetary stance implemented by the Government and new food harvests which had began to reach the markets,” said Lipenga.

The minister said considering the foregoing, inflation is expected to slow down to 14.2 percent by December 2013 and to 7.0 percent by December 2014 as the economy continues to recover.

Earlier, Reserve Bank of Malawi (RBM) Governor Charles Chuka told Business News in an exclusive interview in the capital, Lilongwe that the central bank expects the rate of inflation to continue plummeting backed by increased availability of maize across the country, the relative stability of the local currency, and also a good implementation of a package of both monetary and fiscal policies.