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Economists weigh in on runaway inflation

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Betchani Tchereni

Economists have urged the government to consider further tightening its fiscal policies as one of the ways of containing headline inflation, which has been on an upward spiral in the past months.

The call comes as headline inflation remains within the double digit band, seen at 19.1 percent in May 2022 from 15.7 percent in April.

In a quest to contain the pressure, the Reserve Bank of Malawi recently raised its policy rate to 14 percent from 12 percent and has devalued the Kwacha by 25 percent.

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But economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said in an interview that the monetary authorities have done their part and the fight should now be intensified from the fiscal, trade and industry parts.

“Arresting inflation at this stage does not require monitory policy alone but what we need now is the fiscal policy to come in together with Trade and Industry Ministry so that, in the long run, we are able to manufacture our own goods; otherwise, we are in trouble,” he said.

In a separate interview, professor of Economics at the University of Malawi Ben Kalua said Malawi is not close to arresting inflation as a greater part is due to exogenous shocks.

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“The decisions by monitory authorities were right because all central banks are doing the same but we need the supply side, which is handled by the fiscal authorities, which is the major problem now. That should be handled,” Kalua said.

The increase in inflation rate for May was on account of the rise in both food and non-food inflation to 25.5 percent and 14.2 percent, respectively.

Centre for Social Concern Programmes Coordinator responsible for economic governance Bernard Mphepo expressed similar sentiments, saying the country needs to be producing what its citizens consume.

Launching the Private Sector Labs on Friday, President Lazarus Chakwera admitted the economy is sick but asked for patience from Malawians before things turn around.

“All I ask of you is that no matter how much pain you feel from the surgical tools I use, you trust me to be the good physician you elected me to be and I promise that you will be glad you did, because these surgeries will eventually make our nation’s economic recovery sustainable and unstoppable,” he said.

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