Poor Malawians, those with the least purchasing power, are feeling the pinch of rising cost of goods which has been substantiated by the announcement by the National Statistical Office (NSO) that inflation hit 19.1 percent in May from 15.7 in the previous month.
While inflation affects every consumer, economists argue that those who largely spend their earnings on the most basic needs of their lives are the worst hit.
Meanwhile, economic experts and consumer activists have urged government to tame the rising inflation and ensure that people are sufficiently cushioned against its effects.
NSO’s statistics have been attributed to a rise in food and non-food inflation in the month under review.
“Food and non-food Inflation rates are at 25.5 and 13.2 percent respectively; the urban month-to-month inflation rate is at 1.7 percent while the rural month–to-month inflation rate is at 0.8 percent,” reads a statement from NSO.
Since January this year, inflation has been in double digits as figures from NSO further indicate in January, February and March price rise rate was at 12.1 percent, 13 percent and 14.1 percent respectively.
Economists have since warned that Malawians should brace for continued tough times because the country has a long way to go to contain inflation and start reducing it towards single digit.
Betchani Tchereni, from the Malawi University of Business and Applied Sciences, said the rise in inflation is not surprising and that economists had already predicted that it may go as high as 25 percent before it starts going down.
He attributed the developments to the scarcity of foreign exchange locally and imported inflation as different countries are struggling with the general rise in prices of goods and services.
“There is a lot that government needs to do and this does not require monitory policy alone, but there is need for fiscal policy to come in and work together with the Ministry of Trade and Industry so that goods and services are manufactured in the country,” Tchereni said.
The continued rise in inflation is coming at time the Reserve Bank of Malawi took a tough monitory policy stance by raising the policy rate, a benchmark for other rates such as lending rate, and devaluing the local currency, Malawi kwacha.
The central bank said the devaluation of the local unit aimed at responding to market trends, giving the local currency its true value and to deal with the problem of foreign exchange while the policy rate was raised to arrest increasing inflation.
A professor of economics at the University of Malawi, Ben Kalua, believes the central bank had no choice but to take those decisions in order to cushion the economy from grave harm.
Kalua is, however, pessimistic on the period inflation might be tamed, saying the whole world is struggling with the same and that Malawi being a net importing and consuming nation stands to see one of the slowest recoveries.
“Central banks globally are pressing the panic button, including those in advanced economies such as the European Central Bank and United States Federal Reserve. Therefore, we are in the same boat trying to get out and it will take long,” he said.
The rising inflation means that Malawians have to dig deeper into their pockets to afford basic commodities such as food, clothing and other services including transportation.
Consumers Association of Malawi Executive Director, John Kapito, is of the view that figures from NSO are just reflecting what people are facing on the ground because the cost of living has heavily risen.
He also spelt doom, saying Malawi is not anywhere near having inflation arrested and start turning towards the single digit which was once the case the past years.
“Those figures are just confirming what Malawians are facing. It is a difficult period and I do not think we will get out of it soon because we do not seem to have answers to these problems,” Kapito said.
Centre for Social Concern Programmes Coordinator responsible for economic governance, Bernard Mphepo, also described the rising inflation as a sad development.
Mphepo said the development will make the cost of living to rise further as the minimum wage is still at K50, 000 against sustained spikes in commodity prices.
“Mostly, inflation concerns food; therefore, government should help in flooding the country with enough food, but above all, we need to make sure that we are manufacturing locally what we consume because, in that way, it is easy to control prices,” he said.
Apart from hitting on the micro economy, the rising inflation, which also caused the policy rate to be adjusted upwards, has already threatened the growth of the economy because the anchors of the 2022-23 national budget will not be met.
Presenting the budget statement in Parliament in February, Minister of Finance Sosten Gwengwe said the financial blueprint is premised on assumptions that inflation would average 9.1 percent in this fiscal year and that the policy rate would be maintained at 12 percent.
“Government is optimistic that in 2022/2023 fiscal year, the global supply chain may begin to normalise to near pre-pandemic levels thereby easing the inflationary pressures due to the increase in the uptake of Covid-19 vaccines, which will continue to reduce the severity of the pandemic,” Gwengwe said.
Speaking at the launch of the private sector labs on Friday, President Lazarus Chakwera said the economy will recover but that people have to endure pain.
“All I ask of you is that no matter how much pain you feel from the surgical tools I use, you trust me to be the good physician you elected me to be. And I promise that you will be glad you did, because these surgeries will eventually make our nation’s economic recovery sustainable and unstoppable,” Chakwera said.
Inflation has a lot of bearing on both micro and macro economy as it reduces people’s purchasing power and dwindles economic growth.
Prior to December last year, inflation rate was in single digit until governments, including Malawi, started struggling with rising prices of commodities due to the war between Russia and Ukraine.
Currently, hope lies in the period which the war between Russia and Ukraine would come to an end and how quickly economies recover.