Prices to go Hyper—PwC
Malawian consumers should brace for tough times with projections by PwC, an auditing and advisory firm, indicating that the country will slip into hyperinflation mode this year.
The PwC analysis contained in the April 2024 issue of the World Economic Report by the International Monetary Fund (IMF) supports assertions that Malawi is heading towards a hyperinflation economy alongside Egypt and Sudan,
Malawi’s inflation as of April this year was recorded at 32.3 percent while Sudan and Egypt’s inflation rates were recorded at 63.3 percent and 35.7 percent, respectively.
This means that within this period, prices of goods and services in Malawi will rise uncontrollably as a rise in money supply will not be supported by economic growth, according to PwC.
Reads the PwC analysis in part: “Entities with the currency of Malawi as their functional currency should start applying International Accounting Standards [IAS] 29 for reporting periods ending on or after 31 December 2024.
“Entities should consider any significant events or conditions that might contradict the conclusion that Malawi is hyper-inflationary between now and the end of 2024, which will include
World Economic Outlook that will be issued in October 2024.”
IAS 29 is specifically designed for companies operating in hyperinflationary environments, suggesting accounting bodies anticipate a severe situation in Malawi.
Reacting to the report yesterday, Scotland-based economist Velli Nyirongo said that excessive domestic government borrowing, higher prices of tobacco which has increased the amount of money in circulation and the 44 percent kwacha devaluation effected in November last year, has landed Malawi in a hyperinflation mode.
He said government has to take decisive action on multiple fronts, including tighter spending, improved exchange rate management, better management of interest rates to balance between boosting the economy and managing excess borrowing.
“Consumers will continue to face a significant erosion of purchasing power, which could lead to a decline in living standards and increased hardship for many Malawians,” he said.
Consumers Association of Malawi executive director John Kapito said in an interview yesterday that when inflation is high, the most affected people are the vulnerable who are many in Malawi.
He said: “High inflation affects production as the cost of imports and produced goods become unaffordable which leads to closures of most industries, creating unemployment among many people.
“These figures should help countries such as Malawi to start planning for the future and realigning the economy with such developments.”
Inflation had been declining since December following a drop in maize prices, as new maize started reaching the market.
But in April 2014, inflation rate increased by 0.5 percentage points to 32.3 percent due to rising food and non-food items, according to National Statistical Office data
