Malawi has not been spared from the largest cost of living crisis of the 21st century, which has come amid a limited capacity to cope.
According to the United Nations (UN), the war in Ukraine has fuelled severe price shocks in food, energy and fertiliser, given the centrality of both the Russian Federation and Ukraine in these markets.
This, in turn, has rapidly constrained household budgets.
Said the UN in its analysis of the global impact of war on Ukraine: “This has important implications in terms of poverty levels, real incomes, educational attainment, as well as food and energy access.
“These impacts are also highly regressive as they affect poorest households, as well as women and girls, the most.”
Malawians, just like many other people across the globe, have been trapped between a rock and a hard place.
UN figures show that food prices are, on average, 20.8 percent higher than at this time last year, fertiliser prices have more than doubled while maritime transport costs have more than tripled from the pre-pandemic average.
Volatility of energy prices on the other hand has increased with recognition that a prolonged conflict will lead to higher energy prices in the medium to long- term.
On the other hand, depreciation has taken a toll on currencies in 142 developing countries after the first 100 days of the war.
Reads the report: “Of greatest concern are the vicious cycles beginning to emerge along the transmission channels of the crisis. Higher energy prices, especially diesel and natural gas, increase the costs of fertilisers and transport. Both factors increase the costs of food production.
“This leads to reduced farm yields and to even higher food prices next season. These, in turn, add to inflation metrics, contributing to what were already increasing interest rate pressures and tightening financial conditions.”
On the domestic front, it has not gotten any better.
Annually, the kwacha lost 3.3 percent against the dollar in April 2022, and was just devalued by 25 percent recently, now trading at about K1 031 against the dollar.
Influenced by increases in bond landed costs of fuel and skyrocketing international oil prices, Malawi Energy Regulatory Authority also raised domestic pump prices of petrol by 44.92 percent to K1 999 from K1 380 per litre and by 30.61 percent for diesel to K1 920 from K1 470 per litre.
Owing to supply disruptions out of Ukraine, a key global exporter of maize, increase in maize inputs like fertilisers now fetching an average of K65 000 per 50 kilogramme bag from an average of K37 000 the same time the previous year, and unfavourable weather conditions in some parts of the world, maize prices have also risen in line with the recent global trends.
A 50 kg bag of maize is now fetching an average of K13 500 in produce markets. During the same period last year, prices averaged K7 000.
Driven by both food and non-food price pressures, Malawi’s headline inflation has been on the rise, and was recorded at 19.1 percent in May 2022, from 15.7 percent registered the previous month, according to the National Statistical Office.
Resultantly, the cost of living for an urban family of six has increased by 50 percent within a year from K233 235 recorded in May last to K349 865 in May this year, according to published Employers Consultative Association of Malawi data.
Consumers Association of Malawi executive director John Kapito observes that market prices of goods and services are beyond the reach of a majority of Malawians, 54 percent of whom live in abject poverty, according to the World Bank.
Kapito observes that prices of goods and services in Malawi have gone up by an average 70 percent, at a time when incomes have dwindled, the local unit has been devalued and the war in Ukraine has presented uncertainties and disrupted global supply chains.
He says: “Most consumers are unemployed and do not have access to incomes.Some have been retrenched as a result of Covid-19 and other market failures.
“It is, therefore, important that consumers refrain from engaging in unnecessary purchases at a time when there is no hope that prices will go down.”
Centre for Social Concern economic governance programme officer Bernard Mphepo observes that the increase in cost of living is impacting the living standards of Malawians, most of whom cannot afford basic necessities such as food, education and health.
Reserve Bank of Malawi Governor Wilson Banda, however, says the recent devaluation of the kwacha is going to cushion Malawians from scarcity of commodities on the market which could have triggered unnecessary price increases.
He says between 2010 and 2012, when Malawi adopted a fixed exchange rate regime, goods were scarce across the board from fuel to household items.
Globally, UN says since 2019, the number of people living in extreme poverty has risen by 77 million and the number of people facing acute food insecurity has risen to193 million, with 58 million people in Africa living just above the poverty line at risk of sliding into poverty due to the combined effects of the pandemic and the war in Ukraine.