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Controversy over inflation trends

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An economist has asked authorities to stabilise the supply side of maize and work on lessening the consumption side of the staple if the country is to sustain improvements in key macroeconomic indicators.

Commenting on recent trends in the county’s inflation statistics, Professor of Economics at Chancellor College, Ben Kalua, said it is likely that inflation will start to go up again in the coming months, as the country moves farther away from the harvesting season, pushing up maize prices in the process.

Food features heavily in Malawi’s inflation basket prompting other commenters to suggest that there is need to revise the shopping basket otherwise known as the Consumer Price Index, to give a true reflection of the change of prices of goods and services on the market.

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“We need to diversify maize production away from being predominantly rain fed because we are not far away from harvest [season] and maize is cheaper for most families to access but this may not be the case in the coming months,” Kalua said.

He further said sustaining the value of the price of maize by reducing high concentration of the staple on consumption will be key to maintaining low inflation levels in the months and years to come.

“If we could diversify the use of maize, for example, using the grain as animal feed, we would be able to sustain value of the price maize,” he said.

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Inflation has been declining in recent months hitting single digit at 9.3 percent in August. This is the first time in six years for the country to achieve this milestone.

While some sections of society, including consumers, have taken the news with a pinch of salt, the Reserve Bank (RBM) is optimistic that Malawians will reap from the decline.

Consumers are sceptical to celebrate the decline pointing out that the gains are not translating into a reduction in prices of goods and services.

But RBM spokesperson, Mbane Ngwira, said while a reduction in inflation may not necessarily mean a decline in prices, the trend offers relief to consumers on the level of increase in the prices.

Economists describe such a status as a disinflation where prices of goods and services do not decline in real terms but consumers only experience a slowdown in price increase.

“We are working hard to sustain the momentum and as we speak, foreign exchange reserves are over and above the required three months of imports,” Ngwira said.

Leader of opposition in Parliament and president of the Malawi Congress Party, Lazarus Chakwera, was quoted in the media recently saying single digit inflation which does not translate to socio-economic growth among majority Malawians, is nothing but a figure on paper.

RBM has twice this year slashed the policy rate, now standing at 18 percent, riding largely on the back of improvements in inflation standings.

Although banks have since followed up the policy move with adjustments in their lending rates, concerns are rife that the reductions are inadequate and that it is still more expensive for people to service their loans in Malawi as compared to other countries on the continent.

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