Malawi’s food inflation set a new record in July when it climbed to 39.3 percent, a critical analysis of inflation figures in the past 23 years has revealed.
In July this year, inflation quickened from 37.2 percent to 39.3 percent as rising maize prices continued to bite.
A critical look at the past 23 years shows that before July 2022, the highest food inflation record was held in May 2023 at 38.8 percent followed by February 2013 at 38.2 percent.
The analysis of the food inflation figures further shows that the lowest food inflation in the past 23 years was in September 2003 at 2 percent.
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In its July 2023 maize price report, the International Food Policy Research Institute (Ifpri) observed that maize prices jumped by 27 percent in July from K512 per kg to K650 per kg, the steepest monthly increase this year.
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“The Southern Region witnessed the highest monthly average retail price of K653/kg, which is 13 percent higher than the Central Region’s K580/kg and 38 percent higher than the Northern Region’s K489/kg. The price disparity is primarily due to dwindling supply from Mozambique (where most traders in the South have been purchasing their maize) resulting in traders having to travel longer distances to obtain maize, thereby driving up the prices in the southern region.
“Notably, the highest weekly average price for maize was also recorded in the Southern Region, specifically at Mpondabwino Market in Zomba District, where a kilogramme of maize sold for K792/kg in the 4th week of July,” Ifpri says.
Since May this year, mounting pressure on food inflation has been exerting more pressure on headline inflation seen at 28.4 percent in July.
Last month, the Monetary Policy Committee of the Reserve Bank of Malawi adjusted the policy rate by two percentage points from 22 percent to 24 percent in a quest to put some breaks on runaway inflation.
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In its July 2023 Economic Report released this week, portfolio management and advisory firm Nico Asset Managers says upside inflationary pressures have emerged from both supply and demand-side factors as evidenced by rising food inflation during the harvest period in the second quarter of 2023, which is contrary to seasonal trends, showing that supply-side inflationary pressures have intensified.
Nico further says the cancellation of the UN-backed Black Sea Port Grain Deal by Russia is another source of upside risk, as this is expected to trigger imported food inflationary pressures, in addition to similar reaction of prices of domestically produced cereals and their substitutes.
Among the demand factors, Nico says pressures are likely to emanate from elevated public sector financing requirements as well as exchange rate developments.
“All these developments are driving market expectations and contributing to rising inflation.
The above developments have shifted upwards the trajectory for the inflation outlook.
“Headline inflation is now projected to average higher at 29.5 percent than the MPC’s previous projection of 24.5 percent during the previous MPC meetings. Food and non-food inflation are projected to average at 37.2 percent and 20.4 percent, respectively, in 2023,” Nico says.
