Malawi inflation gathers pace, increases to 23 per cent

Malawi  year-on-year headline inflation rate continue to rise as the National Statistical Office (NSO) has said it has now reached 23 per cent in the month of August from 22.2 per cent in the previous month (July) representing a 0.8 per cent increase as measured by Consumer Price Index (CPI).

Inflation is the rate of increase in prices over a given period of time. It is typically a broad measure, such as the overall increase in prices or the increase in the cost of living. But it can also be more narrowly calculated—for example, for certain goods, such as food, or for services, such as school fees.

NSO data show that the overall food inflation increased to 26.8 from 25.3 percent while non food inflation increased to 19.9 percent from 19.6 percent.

“The inflation increase was due to general price increase during the period as compared to the same period last year,” NSO said.

It added that the urban and rural rates are at 19.5 percent and 26.7 percent respectively.

Inflation in the country is mainly driven by availability of food especially maize.

Inflation reached an all-time high of 37.90 percent in February 2013 and a record low of 6.30 percent in December 2010.

The unemployment rate continues to rise and the local currency, Kwacha is still weakening against major international currencies like th US Dollar.

The weakening of Kwacha currency is in sharp contrast to the high levels of foreign currency the economy is sitting on, cumulatively at $1 billion ($500 billion) as at July 13 2015. This is a combination of gross official reserves, held in the custody of the Reserve Bank of Malawi (RBM) to prop up the kwacha, estimated at $724.29 million, or 3.47 months of import cover, and private sector reserves in commercial banks at $292.4 million, or 1.4 months of import cover.

Recently, Minister of Finance and Economic Planning Development Goodall Gondwe conceded that the country is going through turbulent times and that the economy is in “bad” shape

Gondwe who seeks to achieve single-digit inflation rate in two to three years time set the inflation target for this fiscal year at 15 percent and an inferred December target of 12 percent.

But analysts expect the inflation rate to keep rising as many Malawi face severe food shortages.

In its June 2015 monthly economic report, the Blantyre-based investment advisory firm Nico Asset Managers Limited, said: “Inflation is expected to remain elevated, as a result of the rising food prices from lower than expected harvest and recovering global oil prices.”

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