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Reserve Bank of Malawi revises 2022 inflation target

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Betchani Tchereni

The Reserve Bank of Malawi (RBM) has revised upwards its 2022 inflation rate projection to 10.4 percent, from an earlier forecast of 8.9 percent.

In a statement issued last week at the end of a two-day Monetary Policy Committee (MPC) meeting, the central bank says, in the period ahead, pressures on inflation are likely to continue, mainly arising from a seasonal increase in prices of domestically produced food items and imported inflation.

“Reflecting these pressures, the inflation path has shifted upwards compared to the Fourth 2021 MPC forecasting round,” the statement reads.

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Headline inflation remained in single-digit in all the quarters of 2021 except for fourth quarter when it moved into double-digits.

Specifically, headline inflation averaged 10.8 percent in 2021Q4 against the projection of 10.0 percent and compared to 8.7 percent in 2021Q3.

The increase in 2021Q4 was due to a number of factors including seasonal patterns and speculative tendencies by market traders which pushed up food prices, an upward adjustment in water tariffs and Malawi Housing Corporation rentals, and domestic fuel pump price increases.

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These developments led to an increase in both food and non-food inflation. Nevertheless, the annual average headline inflation remained in single-digit in 2021, at 9.3 percent, marginally higher than the projection of 9.1 percent.

In his State of The Nation Address delivered to Parliament on Thursday, President Lazarus Chakwera conceded that the weakening of the Kwacha against major trading currencies also contributed significantly to the rise in average inflation for 2021.

During the year under review, the annual average food inflation dropped from 13.0 percent in 2020 to 11.4 percent.

In an interview yesterday, Malawi University of Business and Applied Sciences-based economist Betchani Tcheleni said containing inflationary pressure would require concerted efforts and a systematic approach.

“In the short-term, I think it is about diversity; we need to diversify our production base. And in long run, the country should consider a self-sustaining drive by intensifying production and import substitution,” Tcheleni said.

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