‘Pressure on Malawi’s inflation to ease’

Finance Minister Dr. Ken Lipenga expects pressure on Malawi inflation and exchange rate market to ease in the near future on account of recent developments in the economy.

Lipenga on Sunday food inflation is expected to slow down due to the recent injection of relief maize which, he said, will likely thwart the spiraling headline inflation rate currently at 30.6 percent.

“I expect some recent interventions to assist in averting further movements in inflation and, therefore, arrest further pain on the population from the unintended effects of our necessary economic reforms,” he said.

The major drivers of inflation are movements in food prices, the sharp exchange rate depreciation, adjustments in fuel price and tariffs for water and electricity.

But Lipenga said with regard to food inflation, the injection of 50 000 metric tonnes for humanitarian purposes and 15 000 metric tonnes for commercial purposes should dampen demand for grain on the domestic market and, therefore, cushion any further increase in food prices in the economy.

On the continued weakening of the kwacha against other major trading currencies, the minister said recent loan facility amounting $250 million  (about K85 billion) from PTA Bank should help ease pressure in the foreign exchange market as the facility will cover imports of fuel and fertilisers.

“The foreign exchange situation is also expected to improve with imminent additional disbursements of commitments from some development partners,” said Lipenga.

Coupled with continuing tight monetary policies recent developments should help to stabilise further movements in the domestic currency which, he said, will have a direct impact on cushioning imported inflation.

On fuel pricing, the minister said deliberate allocation of $150 million from recent loan resources towards the procurement of fuel should help stabilise fuel prices in the next few months.

“The economy will stabilise in due time as long as we continue to prudently manage the budget and, thereby, supporting the effectiveness of monetary policy,” he said, stressing that failure to sustain this package of reforms could throw this economy into an even more difficult situation with far reaching implications.