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IMF backs Reserve Bank of Malawi’s 5% inflation target

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By Chimwemwe Mangazi:

Jack Ree

The International Monetary Fund (IMF) has said the five percent inflation rate target for Malawi is attainable in the medium term if the country does not slacken on the economic gains registered in the recent past.

Reserve Bank of Malawi (RBM), recently, set an ambition to achieve an inflation target of five percent by the first quarter of 2021.

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IMF Country Representative, Jack Ree, said, considering recent gains, Malawi was poised to attain the set inflation target.

“I think it is possible because inflation dynamics have in the past years been cyclical.

“Every five years, you see inflation changes because of elections. This year, we have a window of opportunity because, even after the elections, we have seen inflation in single digit despite the unfavourable dynamics,” Ree said.

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In its Monetary Policy Meeting report issued last week, RBM says annual inflation is projected to slow down to 9.0 percent in 2019, from 9.2 percent in 2018.

It says non-food inflation remains well anchored in single digit and averaged 5.5 percent in the second quarter of 2019, down from 5.8 percent in the preceding quarter and 8.5 percent in the similar quarter in 2018.

Non-food inflation averaged 5.7 percent during the first half of 2019, significantly lower than the average of 9.0 percent during the same period in 2018.

The RBM statement says, going forward, non-food inflation is expected to remain low, supported by relatively tight monetary policy as well as continued stability of the exchange rate.

RBM spokesperson, Mbane Ngwira, said, while maize prices had gone up unexpectedly, some other factors affecting inflation were still stable including utility prices, international oil prices, adequate foreign exchange reserves; hence, a stable exchange rate going forward.

“Our target of five percent inflation by the first quarter 2021 is still intact and will be achieved. This will present a sustainable macroeconomic environment for increased investment and productivity,” Ngwira said.

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