Rising fuel prices dampen inflation target
Reserve Bank of Malawi (RBM) has revised upwards the 2021 and 2022 inflation rate projection on account of rising fuel prices and global supply chain disruptions.
In a statement on the fourth 2021 Monetary Policy Committee (MPC) meeting issued yesterday and signed by RBM Governor Wilson Banda, the central bank now projects headline inflation for 2021 to average 9.1 percent.
This will represent an upward revision of 0.3 percentage points from this year’s third MPC. The 2022 inflation has also been revised upwards from 8.2 percent to 8.9 percent.
Reads the statement in part: “The revisions reflect the impact of the recent increase in domestic fuel pump prices, a higher-than-anticipated rise in maize prices in the fourth quarter of 2021, and persistent disruptions to global supply chains.”
RBM figures show that from July to September 2021, inflation rate averaged 8.7 percent against a projection of 8.8 percent and was lower than 9.1 percent recorded between April and June,
During the quarter under review, Brent crude oil prices rose to an average of $73 (K60 000) per barrel, from $68.6 (K56 000) per barrel in the previous quarter.
The rising global oil prices pushed government to raise pump prices by 22.8 percent on average last month.
Effectively, petrol went up by 27.89 percent to K1 150 from K899.20, diesel went up by 24.72 percent from K898 to K1 220 while paraffin rose by 15.79 percent to K833.20 from K719.60.
On the other hand, retail prices of maize, which contributes 42.5 percent to the inflation basket, has been on the rise increasing by five percent and averaging K147 per kilogramme (kg) in September, according to the Institute for Food Policy Research International.
Recently, Ministry of Agriculture announced an upward revision of maize selling price in all Agricultural Development and Marketing Corporation (Admarc) outlets from K160 to K205 per kg.
Reacting to the revision yesterday, Malawi University of Business and Applied Sciences associate economics professor Betchani Tchereni said in an interview that rising inflation means that Malawians will have to pay more for their well-being,
He said: “At a time when the Covid-19 pandemic seems to have been dealt with, the country has seen a rise in demand for commodities, including fuel, causing prices to go up.”
In a separate interview, Consumers Association of Malawi executive director John Kapito expressed fear that the rising prices of goods and services would worsen the suffering of consumers.
He said: “Low maize prices were cushioning consumers from the high cost of living. Majority of Malawians have no access to reliable incomes and the price increases would make it even difficult.”
Last week, the International Monetary Fund projected Malawi’s inflation to average 9.5 percent in 2021.
Currently, inflation stands at 8.9 per cent as of September 30 from 8.4 percent in August 2021.
