Runaway inflation outpaces consumers
Inflation—the rate at which prices of commodities change at a given time in an economy—remained volatile for the greater part of 2021.
The economy is almost on its knees as all sectors caught the Covid cold.
Skewed commodities’ output on the global market at the peak of the Covid era, coupled with elevated demand and chronic woes on the domestic landscape, has over the year pushed commodity prices high.
This has pushed headline inflation back to the double digit band, seen at 11.2 percent as at November 2021.
Ironically, when presenting the nine-month 2021-22 National Budget to Parliament in May, Finance Minister Felix Mlusu projected inflation to average 9.4 percent, saying all prevalent inflationary pressures “will be contained”.
Alas, the headline inflation remained on an upward spiral during the greater part of the year.
According to Consumers Association of Malawi (Cama), prices of commodities and services shot up by 58 percent between October 2020 and November 2022.
Cama said, in a statement signed by its executive director John Kapito, that cooking oil topped the increase of prices with Mulawe cooking oil price going up by 146 percent and Kukoma by 98 percent during the said period.
Cooking oil is followed by both bathing and washing soaps as, for example, Butex has gone up by 75 percent, Lifebouy by 51 percent, OMO Powder by 45 percent and Boom Powder by 63 percent among others.
The association had then warned that prices of commodities would continue rising as a result of high import costs and the weakening of the kwacha.
Apart from what Cama pointed out, the country saw Malawi Energy Regulatory Authority (Mera) revising upwards the cost of fuel by more than 20 percent and water boards increasing water tariffs by an average of 52 percent.
All these fed into the headline inflation basket and it did not take time to slip or a double digit in November a development, a thing experts say is scaring.
According to the Centre for Social Concern (CfSC), the rise in inflation means Malawians have been ‘hit below the belt’ and can no longer ignore the pain.
CfSC Programmes Coordinator Bernard Mphepo said the rising inflation clearly signals the high cost of living, concerns of which they have been bringing to the knowledge of government and other stakeholders to be addressed.
He added that this year has had worst price increases in recent times because even the months that favour the economy such as April to September due to the agricultural marketing season, things have been ugly.
“The cost of living is now at K207, 000 per household per month but government has got instruments that can handle the stability of inflation,” he said.
Malawi remains an importing and consuming nation with a very narrow export base whose exports backbone are raw agricultural produce with unprocessed tobacco being the main export earner.
This situation exposes the country naked to price changes on the international market which eventually results in imported inflation whenever prices of different commodities misbehave on the international market.
For example, cooking oil prices rose with over 100 percent due to price increases in crude oil on the international market.
Economist from the Malawi University of Science and Technology Betchani Tcehereni believes the inflation target of a single digit deserved to be missed considering that Malawi has little control over inflation due to over dependence on imports.
He painted a gloomy picture in an interview.
“The best thing government can do is to encourage investments that will see mushrooming of companies that will be producing products locally which will be consumed locally because, that way, international prices will have a little effect on us,” he said.
The Reserve Bank of Malawi RBM spokesperson Ralph Tseka maintained that country will achieve a set goal of having inflation averaging around 5 percent in medium-term.
Minister of Finance Felix Mlusu admitted, in an interview last week, said inflation is above the target, attributing the situation to exogenous shocks due to Covid pandemic.
He added that, almost every country, including super powers such as the United States, has seen headline inflation rising.
“We have imported inflation but, we cannot also ignore local inflation but going forward, this is something I will be addressing in my budget presentation,” the minister said.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.
