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Reserve Bank of Malawi pessimistic on inflation target

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Betchani Tchereni

Reserve Bank of Malawi (RBM) has hinted that the country may miss its inflation targets as global commodity price hike continues to pile pressure on domestic trends.

RBM has expressed the fears in its Market Intelligence Report for February released on Tuesday this week.

According to the report, the war in Ukraine has made prices of imports such as crude oil, wheat and fertiliser to shoot, a situation which has negatively affected prices of various commodities in the country.

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The report further says unless there are interventions to reverse the situation is soaring prices for energy, fertilisers, wheat and other commodities, heightened inflation pressures could persist in 2022.

“To the net-importing countries including Malawi, the deteriorating terms of trade emanating from these exogenous global shocks could exert further depreciation pressures to the local currency, thereby fueling inflation,” the report reads.

Minister of Finance Sosten Gwengwe projects in the national budget that inflation will average 9.1 percent in the 2022-23 fiscal year, a dream which may be farfetched now as inflation remains on an upward spiral.

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Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said the projections were unrealistic considering that macroeconomic fundamentals were already volatile at the time the budget was crafted.

He added that the effect of worsening trade terms and inflation will be dire to the economy because interest rates are likely to rise and the cost of living is also expected to continue rising.

“There is nothing we can do now apart from aggressively approaching donor partners such as the International Monetary Fund and the World Bank for help to cushion other threats,” he said.

Malawi remains a net importing nation despite aspirations to turn it into a predominantly producing and exporting nation.

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