Consumer Price Indices (CPI) released by the National Statistical Office (NSO) have shown that inflation—a general increase in the prices of goods and services in an economy—declined by 1.5 percentage points to 33.5 percent in February.
According to the NSO, food and non-food inflation rates are at 42 percent and 22.1 percent, respectively.
“The national month to month inflation rate for February 2024 stands at 2.2 percent. Food inflation rate is at 2.4 percent while non-food inflation rate is at 1.8 percent. The urban month to month inflation rate is at 2.2 percent. Urban food and non-food inflation rates stand at 2.4 percent and 2 percent, respectively. The rural month to month inflation rate is at 2.1 percent. Rural food and non-food inflation rates stand at 2.4 percent and 1.7 percent, respectively,” an NSO stats flash reads.
In an interview, Economics Association of Malawi (Ecama) acting President Bertha Bangara Chikadza said inflation pressures began to dissipate around January owing to Admarc interventions but also the relief food items being distributed across the country.
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“Since a larger part of the overall inflation is food inflation, controlling the prices of maize will definitely control overall inflation. The continued downward trajectory will be expected if the efforts in the distribution of relief maize will continue; otherwise, with the effects of El Nino, most parts of the country will not have adequate food and without relief food, prices will pick up again,” Chikadza said.
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Economist Marvin Banda said figures from the NSO are not surprising considering that the farming season, being multifaceted, allows for different crops sown to bear fruit at different times.
He said this is normal annual occurrence which sees inflation figures drop as we enter the main maize harvest season.
“It is expected that as pressure on food inflation drops, the CPI follows suit to follow the cyclical nature of Malawi’s inflation path. However, the trend still remains higher for longer unless a positive supply shock occurs that will plunge food inflation lower. At 22.1 percent, non-food inflation is very elevated.
“Let us remember that the inflation figures are aggregated over the whole country. In some areas, inflationary pressures persist but in other they are beginning to dwindle. There are many factors that influence inflation in Malawi.
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“The lag effects of certain policies are starting to constrain inflation. However given that the levels are still elevated, we are still to feel the full effects of the fiscal multiplier effect from all the furlough programmes. But historically, Malawi sees a drop in inflation as we come close to harvesting,” Banda said.
He added that the inflation slowdown will only be experienced in the short term.
“Malawi needs to tackle its crises if it is to win the fight against inflation. We have a fiscal crisis which needs to be mitigated meticulously by enhancing revenues and expenditure prudence. If that happens, we will be fighting our debt crisis which has large interest expenses. We then have a monetary crisis which aims to cover our Balance of Payment (BOP) crisis, which arise from import financing needs of strategic commodities as well as runaway private sector expenditure.
Recently, the Reserve Bank of Malawi (RBM) indicated that inflation will begin to fall and reach the medium-term target of 5 percent in 2026 on the back of the tight monetary policy stance it has adopted in recent years.
RBM’s Director of Economic Policy and Research Kisu Simwaka said the central bank adopted a plus or minus 2 inflation target, which means the 5 percent is in the range of 3 to 7 percent.
“We have been in single digit inflation before and we will achieve the target in the medium term,” Simwaka said.
