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Inflation accelerates to 9.5 percent

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By Taonga Sabola:

Malawi’s headline inflation surged by 0.2 percentage points in September 2018 to hit 9.5 percent as both food and non-food prices ballooned, the National Statistical Office (NSO) has said.

The development means Malawi’s inflation is only 0.5 percent shy of hitting double digits.

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According to NSO, food and non-food inflation was recorded at 10.2 and 8.9 percent, respectively.

The surge in inflation comes at a time maize prices are threatening to run away following pockets of food deficit driven by drought and fall armyworm attacks in some districts of the country.

The rise also comes at time Malawi Energy Regulatory Authority (Mera) has in recent weeks nodded to increases in fuel and electricity prices.

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Investment management and advisory firm, Nico Asset Managers, has since said it expects pressure on food inflation to continue mounting going forward.

“This is primarily due to the lean season beginning in September 2018 rather than October 2018. In addition, the below average market supply of maize and the institutional purchases being 17 percent above the average market price of K127 per kilogramme will exert pressure on food inflation.

“However, carry-over stocks from the previous season and cross border maize imports may slightly cushion the effects,” said Nico Asset Managers in its September 2018 Economic Report.

It added that inflation pressures may continue to increase as the rise in global oil prices, local fuel prices, increased electricity tariffs, and other factors such as increase in water board tariffs, wage increases in the public sector, increased public expenditure in the run up to the 2019 elections and rising housing costs exert pressure on prices in the long term.

In its latest Monetary Policy report released last week, the Reserve Bank of Malawi (RBM) said it expects Malawi’s inflation to average nine percent this year.

RBM was, however, quick to note that risks to the inflation outlook persist on account of further increases in administered prices, higher food and global oil prices, and increased public sector financing requirements.

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