RBM sees elevated commodity prices
T
he Reserve Bank of Malawi (RBM) says as the Russia-Ukraine war rages on, the price of key commodities such as oil, food and fertilisers remain elevated, thereby putting pressure on the country’s inflation.
In its April 2022 RBM Market Intelligence Report issued on Tuesday, the central bank said although some of the commodities’ prices moderated during the month under review, it remains unlikely that the supply disruptions will normalise soon.
The central bank said unless there are interventions to reverse the soaring prices for crucial commodity prices, heightened inflation pressures could persist in 2022.
Reads the report in part: “Beyond the broader impact on inflation, supply disruptions of key commodities could severely affect a wide range of economic sectors including crop agriculture, manufacturing, construction, and transport.
“Consequently, inflation is expected to remain high, derailing the post-Covid-19 economic recovery even further.”
RBM was however quick to mention that that it remains vigilant and will take required action to minimise the social welfare losses associated with the persistence of the costs of the prevailing shocks
Meanwhile, Malawi Inflation is fast rising triggered by a rise in food and non-food inflation.
National Statistical Office data shows that headline inflation rate for April quickened by 1.6 percentage points to hit 15.7 percent while during the same period last inflation was recorded at 9.2 percent.
During the period, food inflation went up to 19.5 percent, a rise from 17.1 percent the previous month while non-food inflation also rose to12.2 percent in April from 10.5 percent the previous month.
This means prices of goods and services during the period under review increased at a fast rate compared to the same period last year.
In Malawi, maize, as part of the food component, accounts for about 45.2 percent of the consumer price index, an aggregate basket of goods and services used in computing inflation.
Meanwhile, local maize prices have continued to rise, averaging K250 per kilogramme (kg) or K12 500 per 50 kg bag.
Famine Early Warning Systems Network (FewsNet), a United States Agency for International Development-funded activity, has also projected high maize prices as macroeconomic conditions in Malawi continue to worsen.
On the other hand, oil prices have remained volatile due to potential supply constraints following the conflict between Russia and Ukraine.
Malawi Energy Regulatory Authority recently adjusted upwards pump prices of petrol, diesel and paraffin by 20 percent, 31.25 percent and 14.47 percent to K1380, K1470 and K956, per litre, respectively.
During the second Monetary Policy Committee (MPC) meeting held last month RBM revised the policy rate from 12 percent to 14 percent, in the process elevating lending rates in commercial banks.
RBM revised its projection for annual average headline inflation rate for 2022 from 10.4 percent during the first MPC meeting to 12.3 percent, reflecting the impact of hikes in commodity prices.
Catholic University of Malawi economics lecturer Hopkins Kawaye in an interview observed that inflation is expected to continue rising on account of, among others, imported inflation.
