Malawi’s inflation at 30.6 percent

Malawi’s year-on-year headline inflation for October jumped 2.3 percentage points to 30.6 percent on the back of volatile food and energy prices as well as non-core items.

“Food inflation has gone up by 32 percent compared to 2.9 percent during the same period last year due to price increases in some processed foods and seasonal items in some areas of the country,” said the National Statistics Office (NSO).

With two million Malawians facing starvation, the rising inflation rate could further push food out of the poor’s reach and plunge them deeper into abject poverty.

The persistent general rise in prices could also force the Reserve Bank of Malawi (RBM) to hike interest rates for the third time in six months in an effort to curtail the evil that gnaws at purchasing power—consumers’ ability to buy goods and services.

Higher interest rates could also hit hard the already fragile private sector and hard-pressed households, with the resultant prohibitive cost of borrowing pushing the economy, growing at an anaemic 1.9 percent, into recession.

Implementation of the 2012/13 national budget, which assumed that this year’s inflation rate would average 18.4 percent, could also be sent off rails as planned allocations shed their real value.

A 30.6 percent inflation rate is one of the highest Malawi has registered in the last decade, with both fiscal and monetary authorities eying the number warily.

Already, Finance Minister Ken Lipenga has cast doubt on the possibility that Malawi can attain the average inflation rate of 18.4 percent this year as his 2012/13 national budget projected.

Lipenga said last week that he sees the spike in inflation rate easing to around 13 percent in 2013, but did not explain the conditions for such a development.

Core inflation, which excludes energy and food prices because of their price volatility, has gone up by 29.4 percent compared to 13.1 percent during the same period last year.

Analysts say the sharp uptick in core inflation signals a dark medium to long-term outlook and hard times for consumers.

A lecturer in microeconomics at Chancellor College, Levison Chiwaula, on Wednesday warned that such a continued increase in the prices of goods and services as shown by the skyrocketing headline inflation rate means more suffering for Malawians.

The rising inflation rate is coming at a time energy prices are trending upwards and the Malawi kwacha continues to depreciate against major trading currencies as it floats without forex to prop it.

Barely two weeks ago, the Malawi Energy Regulatory Authority (Mera) revised upwards both fuel and electricity prices which all point to the erosion in the income of most average consumers.