The past year, 2022, will be a period to forget for consumers, as rising inflation shook homes in Malawi.
Prices of basic commodities such as food stuffs, clothing and shelter (rent) were seen rising to levels most Malawians described as unbearable.
For example, the International Food Policy Research Institute (IFPRI) reported that in January 2022, maize retail prices averaged K191 per kilogramme (kg), representing K9,550 per 50kg per bag.
However, in December, the price of the staple crop was seen at an average K25,000 per 50kg bag, representing a 162 percent increase.
Similar trends were seen in prices for groceries and other household items such as sugar, cooking oil, bread, wheat flour, soap and beer products, among other things.
This also affected the cost of living, which soared from K235,584 in January to K325,902 in October 2022, according to figures from the Centre for Social Concern.
Such developments reflected on the headline inflation figures, as computed by the National Statistical Office and cited by the Reserve Bank of Malawi (RBM), from 12.1 percent in January to 25.8 percent in November 2022.
Worth noting is the fact that inflation went as high as 26.7 percent in October 2022, the first time since July 2013.
Such trends were enough to press the authorities to review economic fundamentals such as the policy rate.
The rate was raised from 12 percent to 18 percent, which resulted in a corresponding change for borrowing interest rates in commercial banks.
However, economist from Malawi University of Business and Applied Sciences Betchani Tchereni argues that rising inflation in Malawi is not a case of too much money chasing few goods; rather, it is a case of vulnerability to imported goods.
“Prices of goods in Malawi were not rising because of demand and supply issues but because prices of those products on the international market had risen and suppliers were only passing on the effect to consumers.
“The government should handle inflation from the fiscal side by industrialising the economy so that Malawi consumes what it produces,” Tchereni said.
But in its monthly Market Intelligence reports, RBM maintains that it will continue to tighten the monetary space to control inflation.
On the fiscal front, Minister of Finance Sosten Gwengwe was forced to increase the 2022- 23 national budget by K10 billion to meet the rising cost of expenditure and development budgets, during the midyear budget review, due to rising inflation.
Gwengwe said the rise in headline inflation was largely driven by food and imported inflation propelled by rising global fuel and food prices and the exchange rate as well as the 25 percent depreciation of the official exchange rate in May.
“Inflation has piled pressure on fiscal performance due to price escalations for most goods and services. Addressing supply constraints will help boost local production as a lasting solution to tame inflation.
“Malawi must produce and export. Beginning this season, the government is working with the Green Belt Authority, the Malawi Defence Force, prison and private sector players including Press Agriculture to establish mega farms to increase agricultural production for both local and foreign markets,” Gwengwe said.
There is a need for the authorities from both the monetary and fiscal fronts to work together if Malawians are to be spared from the pangs of the monster that is inflation in the New Year.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.