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Cost of living remains high

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By Justin Mkweu and Chimwemwe Mangazi:

Mark Botomani

Lowering price of maize in some parts of the country could not offset a surge in cost of living, which remained elevated at K211, 000 per month for an average family of six people in March and April, the Centre for Social Concern (CfSC) has said.

Maize, Malawi’s staple crop, impacts inflation movement heavily given that it constitutes 45.2 percent in the consumer price index.

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Inflation, however, decelerated by 1.2 percentage points in March 2020 to 9.8 percent.

The cost of living went up by 8.7 percent from K194, 048 in April 2019 but went down by 4.7 percent from K221, 391 recorded in February 2020.

The cost of living is the amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare.

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At the peak of this year’s harvesting season in April, prices of maize, Malawi’s staple crop, went down to K9, 500 from K17,500 in Mach.

Non-food inflation stood at 5.1 percent compared to 5.4 percent recorded in February, 2020 while food inflation rate was seen at 14.7 percent compared to 17.6 percent in February, 2020.

In a statement accompanying its ‘Basic Needs Basket’ report, CfSC attributes the rise in cost of living to prevailing Covid-19 pandemic which has led to a slowdown in economic activities.

The situation has led to a sharp rise in prices of essential commodities as the supply chain has been greatly affected.

“CfSC has observed that government intervention in the reduction in fuel prices is not benefiting local Malawians since the cost of transport and other commodities are still very high. The reduction in price of fuel without a responding decrease in cost of essential commodities is increasing income inequality between the rich and poor, hence, an increase in poverty levels.

“The government should put measures to ensure that the downward adjustment is benefitting ordinary citizens not few elites,” reads the statement in part.

In an interview, CfSC Programmes Officer for Economic Governance, Bernard Mphepo, said the government should consider increasing the minimum wage to at least a K100, 000.

“It is also necessary for the government to increase the free tax band to K100, 000 which can lead to an increase in disposable income. The increase in disposable income will lead to an increase in demand for commodities.

“They should also consider the removal of taxes on essential services such as water and electricity. The reduction in taxes on essential services will promote increased access to essential services for low income earners and life will become more affordable,” Mphepo said.

While welcoming the recommendations made as subject for consideration, the government spokesperson, Mark Botomani, said the state is already implementing measures to cushion people from possible effects of pandemic.

“The Government has done its part but we will continue to engage other stakeholders to make sure that they respond positively,” Botomani said.

In an email response to a questionnaire UK based Malawian economist, Sane Zuka, said the trend is normal.

“The annual trend is that the cost of living decreases during these months, this is normal. The current situation, however, means that subsistence farmers will be holding maize as a safety net for the unpredictable times to come.

“This situation will potentially drive maize prices up than would be the case under normal circumstances. Thus, low maize prices will be for a very short period of time and the cost of living is expected to quickly take an upward trend, especially for the urban residents,” Zuka said.

Economics lecturer at the polytechnic, Betchani Tcheleni, added that the month-on-month decrease of the cost of living is mainly due to the availability of food on the market which has pushed the price downwards

“The cost of living is likely to be high in real terms because of the effects of the Covid-19. For example, there are goods and services which have now become short of supply. Goods such as building materials, car spare parts, and other things are now scarce. As a result, the cost of living could go higher,” Tcheleni said.

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