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Inflation drops to 5-year low

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Malawi’s inflation sank to a five – year low in April 2017, largely thanks to improved food availability coupled with a tight monetary policy employed by the monetary authorities, figures from the National Statistical Office (NSO) have shown.

In an inflation update on Friday, NSO says headline inflation decelerated from 15.8 percent in March 2017 to 14.6 percent in April 2017.

“The headline inflation for April 2017 stands at 14.6 percent compared to the headline inflation of 20.9 percent for the same period last year (April 2016). There is a decline of 1.2 percent from last month (March 2017),” says NSO.

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Urban and rural inflation rates, according to NSO, stand at 12.5 percent and 16.2 percent respectively.

Overall, food inflation stands at 14.7 percent from 17.0 percent while non-food inflation stands at 14.4 percent from 14.5 percent in March 2017.

Malawi’s inflation surged sharply after 2012 following the massive devaluation and eventual floatation of the kwacha, hitting 37.9 percent in February 2013, a development which saw consumer prices skyrocketing.

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The rising inflation also drove up interest rates in commercial banks, resulting in high non – performing loans as businesses struggled to honour their loan obligations.

With Malawi expected to record a bumper harvest this year, following good rains, analysts expect inflation to continue on the downward spiral in the coming months.

In a Monetary Policy Statement, RBM said the outlook for inflation in the second half of the year will depend on fiscal outturn for 2016/17 and developments in the foreign exchange market.

“The Reserve Bank of Malawi has continued to implement a tight monetary policy stance, resulting in money supply growth slowing down from 30 percent in June 2016 to 15 percent in December 2016,” RBM said.

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