Economic experts have predicted doom and gloom for urban dwellers in coming months as they foresee continued rise in the cost of living.
The cost of living is the level of prices relating to a range of everyday items in a given period and size of household.
Recent figures from the Centre for Social Concern (CfSC) indicate that the cost of living for April 2024 increased by 2.2 percent to K521,936 for a family of six in an urban setting from K510,720 in March 2024.
Surprisingly, the increase was recorded in a month the International Food Policy Research Institute (IFPRI) report showed a decline in maize prices which is the main component in the Basic Needs Basket.
In an interview, Consumers Association of Malawi Executive Director John Kapito said Malawi’s inflation and exchange rates are drivers of the current cost of living.
“The decline in maize prices is not enough to trigger any movement both upward and downward to warrant any gains to the consumer. Our economy is so imperfect to the extent that certain changes would not be passed to consumers in an economy where inflation is above 30 percent.
“It it’s important to balance that with our inflation much as I appreciate the Centre’s findings it is important to understand it’s weighted basket not only one or two items however either 2.2 percent is negligible in this economy,” Kapito said.
In a separate interview, economist Marvin Banda said the development exposes a great erosion of people’s purchasing power by inflation forces that are not just transitory but are systemic and idiosyncratic to the national economy.
He said the cost of living is on a constant increase in the medium term because prices are Calvo-sticky-upwards.
“The cost of living is extremely elevated to indicate that the food component dominated translates upward-sticky prices putting pressure on daily family needs,” Banda said.
He added that non-food inflation has remained above the 17.75 percent 40-year average headline inflation for the recent past, typifying that goods and services are continuing to strain the pockets of families across the nation for example housing and utilities make up 23.7 percent of the CPI.
The influence of the increase in the policy rate have ensured that the borrowing cost have increased steadily across board which naturally translates to a jerk borrowing costs to soothe transitional expenditures causing a spike in inflation before the intended policy effects ensue.
Furthermore, Malawi’s shrinking export base has contributed to the cost-of-living increase as a lot of import substitutes as well as the effects of currency realignments increase the cost of imports.
The revenue base for non-agricultural exports has been on a troubling decline in the past and it is exacerbating the ill effects of transitory inflation as well as ensuring that long-term inflation remains high.
