Rising oil, fertiliser prices worry Reserve Bank of Malawi

Wilson Banda

The Reserve Bank of Malawi (RBM) sees international oil and fertiliser prices rising in the second half of the year, which will result in deteriorating terms of trade in the short to medium term.

The prediction comes at the start of the lean season, when Malawi imports the bulk of her agriculture inputs, especially fertiliser, in readiness for the next growing season.

In recent weeks, fertiliser prices have threatened to go through the roof, going as high as K36,000 per 50 kilogramme bag on the local market.


In its Monetary Policy Report for July 2021 released on Tuesday, RBM— whose governor is Wilson Banda— says rising prices of imports will likely outweigh the rise in prices of export goods.

According to the report, Brent crude oil prices rose to $68.6 per barrel in the second quarter of 2021 from $60.6 per barrel in the first quarter due to the impact of the reopening of most economies as a result of vaccination rollouts which, in turn, has led to increased travel and transport activities.

The United States (US) Energy Information Administration has predicted that Brent crude oil prices would average $68 per barrel in the third quarter of 2021, as oil-producing countries have agreed to increase production to meet rising global demand.


According to the report, the price of tobacco, Malawi’s main export crop, is anticipated to increase in 2021 compared to 2020, buoyed by a projected excess demand for tobacco of all types.

“According to the Tobacco Commission, tobacco production for 2020-21 agricultural season is estimated at 124.3 million kilogrammes against the demand of 132.3 million kilogrammes,” RBM says.

Meanwhile, the Malawi Energy Regulatory Authority (Mera) has said it continues to monitor international prices and the performance of the Kwacha against the US dollar, which are the two key factors that impact fuel prices.

Since March this year, when local pump prices were adjusted, the landed costs of petrol, diesel and paraffin have increased by 23.51percent, 16.03 percent and 16.37 percent, respectively.

According to Mera, as of August 2 this year, Price Stabilisation Fund balances for petrol, diesel and paraffin averaged K1.7 billion against the recommended minimum of K5 billion.

On the availability of the commodity, Mera said Malawi continues to enjoy healthy fuel stock levels, further indicating that importers have adequate fuel stock balances with international suppliers from the ports of Beira, Nacala and Dar es Salaam.

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