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Rising prices push inflation to 14.1%

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Rising commodity prices have pushed headline inflation rate (year-on-year) for March 2022 to 14.1 percent, a situation an analyst says could continue piling pressure on other key macroeconomic fundamentals.

The headline inflation is seen above the policy rate—the rate at which commercial banks borrow from the Reserve Bank of Malawi (RBM) as lender of last resort—which has been standing at 12.0 percent for over 12 months now.

The March inflation is also higher than the 13 percent inflation rate registered in February 2022.

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Both food and non-food prices have been on an upward spiral in the country due to exogenous shocks including the disrupted global supply chains emanating from the Covid pandemic and Russia’s invasion of Ukraine, among other things, coupled with domestic structural challenges.

According to figures from the National Statistical Office (NSO), during the month under review, food and non-food inflation rates stood at 17.1 percent and 10.5 percent, respectively. Food inflation was seen at 15.3 percent in February 2022 while non-food inflation stood at 10.1 percent.

The food component, largely influenced by maize—Malawi’s staple crop which has a huge weight at 45.2 percent in the Consumer Price Index—heavily impacts the country’s inflation.

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As the lean season is at its peak between February and April, maize price rises as stocks are seen depleting.

On the non-food component, the recent fuel price hike announced by the Malawi Energy Regulatory Authority (Mera) piled pressure on headline inflation as the cost of other basic commodities and services, including transportation, have been rising.

Earlier this month, Mera announced a 20 percent upward adjustment in prices of petrol from K1,150 to K1,380 per litre while diesel prices were raised by 31.25 percent from K1,120 to K1,470 per litre. Prices of paraffin were adjusted by 14.74 percent from K833.20 to K956.

Meanwhile, Malawi University of Business and Applied Science-based economics lecturer Betchani Tcheleni has painted a gloomy outlook.

In an interview Sunday, Tcheleni said, amid the prevailing global economic challenges, the country has other structural challenges which may persist in the near future.

“The financial sector should be expecting hiked policy rate from the RBM when the MPC [Monetary Policy Committee] next meets and that may trigger a reduced investment financing.

“We should expect that the government budget will be negatively affected as the estimates were on the assumption of a lower rate of inflation and interest,” Tcheleni said

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