The Reserve Bank of Malawi (RBM) has rubbished reports suggesting that Malawi could slip into hyperinflation later in the year.
The central bank has also trashed speculation that the Kwacha could witness devaluation, describing such reports as baseless and dangerous.
In its analysis in the April 2024 issue of the World Economic Report by the International Monetary Fund (IMF), auditing firm PwC opined that Malawi could slip into hyperinflation mode this year alongside Egypt and Sudan.
In economics, hyperinflation is used to describe situations where prices of goods and services rise uncontrollably over a defined period. In other words, hyperinflation is extremely rapid inflation.
Generally, inflation is termed hyperinflation when the rate of inflation grows at more than 50 percent a month.
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But in an interview on Tuesday, RBM spokesperson Mark Lungu reacted angrily to such sentiments, saying the bank’s projection for inflation for 2024 is not in those ranges.
“In fact, we expect inflation to come down. Despite El Nino and some dry spells in some parts up north, we have seen the Central and the Northern regions experiencing some redemption in food production and that has a positive impact on inflation development.
“The efforts by the government and other players to alleviate the food deficit in some parts should also definitely work in our favour. The exchange rate has also maintained a stable momentum, which is good for us. As such, we maintain that inflation will come down and not the other way,” Lungu said.
The RBM spokesperson said the negative sentiments about possible hyperinflation are detrimental to the local economy and should be avoided at all costs.
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“The danger is that once you start these speculations merchants position themselves and raise prices for no reason at all.
“We don’t know the basis for such negative sentiments but we urge the public to only listen to the central bank on such important matters,” Lungu said.
On reports of a possible devaluation, Lungu described it as just another unfounded speculation.
“There is no such a thing. The Monetary Policy Committee met early May this year and issued a statement which did not contain such information.
“In the same way as is the case with inflation, such speculations fuel unnecessary price hikes and this has an impact on everyone. I again urge those with such unpatriotic tendencies to refrain from such,” Lungu said.
He observed that baseless speculations are very detrimental to the economy as they compel merchants to adjust prices of goods and services for no reason at all as they believe such news.
“In the end, everyone is affected. These should be avoided at all cost,” he said.
In recent weeks, Malawi has seen significant dollar injections from the African Development Bank, the World Bank and the Global Fund to support various initiatives.
Lungu said the inflows of foreign exchange are a good development for the country for a number of reasons.
“These are resources meant for development which assist in growing our economy but at the same time we get foreign exchange reserves which have a positive bearing on exchange rate developments and inflation processes,” he said.
