RBM for collaborative efforts to curb inflation

 The Reserve Bank of Malawi (RBM) says it cannot single-handely control the rise in inflation, saying there is need for collaborative efforts of stakeholders as the rate jumps 0.4percentage points to 32.7 percent in May.

RBM spokesperson Mark Lungu said this yesterday in the context of the rising inflation rate for May 2024, which has increased by 0.4 percentage point to 32.7 percent, according to the National Statistical Office.

He said that monetary policy alone cannot solve the current inflation challenges, adding that they are a combination of many factors.

Said Lungu: “The environment in which we operate has significantly changed. Of late, economies, including Malawi experience a number of exogenous economic shocks from rising commodity prices to weather induced shocks. As such, inflation sources have also multiplied.

“This is the reason there is need for collaborative efforts from all key players to ensure we insulate the economy from these shocks.”

He said the central bank has at its disposal monetary instruments which are effective in managing demand side of the equation.

“The imported inflation is a result of our supply gap and we need to close that by boosting domestic production which will bring about import substitution,” said Lungu.

In a separate interview, National Working Group on Trade Policy chairperson Fredrick Changaya said yesterday that the current dynamics are vindicating the calls by some stakeholders that it is high time the RBM reviewed its inflation policy.

He said it is not practical to curb inflation by hiking interest rates because the rising commodity prices are not driven by demand, but the supply deficiencies.

Said Changaya: “I have always argued that it is high time authorities found better ways of curbing inflation because our monetary policy has failed to bring down inflation despite raising interest rates several times.

“I think it is a welcome development that RBM is acknowledging that their instruments cannot entirely control inflation.”

Consumers Association of Malawi executive director John Kapito said enterprises and consumers should brace for tough times ahead, adding that the situation will worsen in the coming months.

The World Bank earlier projected that Malawi could be in hyperinflation by the end of 2024.

In its statement, the NSO said food and non-food inflation rates were recorded at 40.7 percent and 22.1 percent, respectively in the month under review.

“The urban month-to- month inflation rate is at two percent. Urban food and non-food inflation rates stand at 3.4 percent and 0.2 percent, respectively,” reads the statement.

One of the main mandates of the RBM is to ensure price stability and the central bank bank is known with its tightening stance by raising policy rate to lower inflation when pressure on commodity prices increase.