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Gloom as cost of living bites

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The spike in prices of commodities is pushing more Malawians into extreme poverty and the future looks tougher for a country that is neither producer nor exporter of note—so goes the warning. But government claims it has a plan in place…

By Deogratias Mmana:

Malawians’ status as among the poorest people in the world is getting worse as the rising cost of living is pushing more of them into extreme poverty.

And unless the government shows economic leadership and finds ways to stabilise the kwacha against a further fall and improve management of the little available resources, the situation could get even worse.

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These are the views of commentators, amid growing concerns by the public at how living has become costlier.

Basic needs basket reports of August, September and October 2021 by the Centre for Social Concern (Cfsc) show increasing trends for the cost of living for a family of six.

The trends show that in an urban setting, the cost of living was at K205,238 in August, rising to K207,334 in September representing a 6.7 percent increase. In October, that family needed a minimum of K221,543 to survive.

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According to the CfSC, the rising cost of living from August to September was perpetuated by depreciation of the kwacha and increase in prices of maize and fuel.

Soon after the June 2020 presidential election, Malawians were squeezed into a poverty trap as the cost of living jumped by 91 percent for a family of six from K164, 316 in July 2020 to K314,914 in January 2021.

This was due to rising food and non-food prices.

Between January and March 2021, the cost of living eased marginally by 2.7 percent to K208,926 from K209,366. The downtrend was perpetuated by expectations of a bumper maize harvest. However, the trend faced pressure from increase in fuel prices.

Now commentators are warning that cost of living is likely to continue to rise as Malawi enters a lean period overshadowed by Covid-19 impacts and lack of economic leadership.

Economist Milwad Tobias attributed the high cost of living trends to the weakening of the kwacha against its trading currencies.

“For a net importer economy, the exchange rate has significant influence on domestic prices. As we move to lean season, prices are bound to continue rising,” Tobias warned.

He said what is needed is to find ways of stabilising the Kwacha by working on both increasing supply of foreign exchange and reducing the use of available foreign exchange reserves.

“The former may involve government looking for short term accommodation and satisfying conditions to qualify for a programme with the International Monetary Fund MF.

“The latter may involve suspending approvals of foreign exchange application on imports considered non-essential such as furniture,” he said.

Executive Director for Consumers Association of Malawi (Cama) John Kapito said there is no end in sight for these woes just yet.

“We advised and warned consumers early this year that the economic future looks very bleak and that cost of living will continue. Our assessment is that these trends will continue in the next two years hurting Malawians.

“The kwacha is getting weaker and will continue to do so; the prices of petroleum products will continue rising; global oil price reductions will not benefit Malawi as there will be no price reversals,” he said.

And amid the ravages of Covid-19, Kapito does not see Malawi recovering soon “without proper serious economic leadership”.

“I don’t see Malawi which is neither a producer nor an exporter, surviving this economic pressure. Whatever we wish to do in Malawi, nothing will work without proper serious economic leadership which unfortunately we do not have,” said Kapito.

Last week, the Malawi Human Rights Commission (MHRC) expressed concern over the rising cost of living and its implications on enjoyment of human rights.

It challenged the government to move away from mere rhetoric and to come up with realistic action on the recovery plan.

The Commission noted that for the past months, there has been a sharp rise in prices of fuel and basic commodities such as cooking oil by 75 percent, water by 52 percent and introduction of 16.5 percent Value Added Tax on non-banking services.

“There is need for government to strike a good balance between broadening tax base and creating a conducive socio-economic environment for all where reduction of poverty and wealth creation is not just a rhetoric but is evidenced by action and realistic action,” said the Commission in a statement dated November 23, 2021 and signed by chairperson Scader Louis.

The Commission asked the government to come up with a clear strategy on how it intends to address the problem of high cost of living and supply chain.

It is said this is in line with Article 2 (1) of the International Covenant on Economic, Social and Cultural Rights which requires states to demonstrate that they are making every effort to improve the enjoyment of such rights even when resources are scarce.

“Equally important in this economic crisis is to ensure that government remains committed to human rights obligation that will ensure protection of people’s rights and equal opportunities even in time of economic crises,” reads the statement.

But Principal Secretary for Economic Planning and Development Winford Masanjala said yesterday in an interview that government has in place the social economic recovery plan and that Parliament already passed it.

“It exists,” Masanjala said, adding that the National Planning Commission is finalising the document.

Currently, some Malawians, led by former youth director for UTM Bon Kalindo, have been staging demonstrations demanding that government should find solutions to the rising prices of commodities.

The first of their protests took place in Blantyre and the second wave of protests took place last week in Lilongwe with the third held in Mzuzu Friday.

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