The Reserve Bank of Malawi (RBM) has called for urgent fiscal responsibility from the government to counter rising economic risks, including sticky food prices, adverse external sector developments, and mounting fiscal pressures.
The central bank, citing these challenges, revised its 2025 inflation forecast upward to 27 percent from 26.5 percent, warning that unchecked borrowing could exacerbate the country’s economic woes.
Speaking at a briefing on Thursday in Mzuzu after the Second 2025 Monetary Policy Committee (MPC) meeting in the city, RBM director of economic policy and research Mark Lungu emphasised the need for fiscal prudence.
He said: “If revenue falls short, then expenditure must be consolidated. Borrowing should only bridge the gap, not balloon into a crisis.”
Lungu further tipped authorities to boost revenue or cut spending to avoid excessive debt accumulation.
The MPC noted that inflation rose to 29.9 percent in the first quarter of 2025 from 29.2 percent in the previous quarter, driven by food inflation, which climbed to 37.6 percent from 36.5 percent.
Despite this, both figures are significantly lower than the 33.4 percent headline inflation and 41.9 percent food inflation averages recorded in the first quarter of 2024.
Non-food inflation eased to 18.1 percent from 18.4 percent in the fourth quarter of 2024 and 22.1 percent in the first quarter of 2024.
Lungu highlighted that while inflation averaged 32.2 percent in 2024, the projected 27 percent for 2025 reflects progress.
In an interview, Malawi University of Business and Applied Sciences economist Sane Zuka said the decision to maintain the policy rate is sound, given the current economic instability.
The MPC will reconvene in July to reassess its stance based on economic developments.
