Rising electricity tariffs, transport costs as well as fuel price are having a knock-off effect on consumers’ disposable incomes and savings rate, analysts have said.
Disposable income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.
At 2.9 percent, according to the Reserve Bank of Malawi (RBM), Malawi’s national savings rate is below the world average of 12 percent, which economic analysts say negatively affects economic development.
Recently, the Malawi Energy Regulatory Authority (Mera) raised the prices of petroleum products by an average of five percent, a development which also triggered Minibus Owners Association of Malawi (Moam) to effect a five percent price adjustment on minibus fares.
Mera also approved a 31.8 percent electricity tariffs hike for Electricity Supply Corporation of Malawi (Escom) over a four-year period with 20 percent effected on October 1 2018.
Electricity, housing and water as well as transport contribute 21.2 percent to the consumer price index (CPI), an aggregate basket of consumer goods and services for computing inflation.
As of August 2018, a family of six in urban area required at least K178 074 to survive in a month, against the minimum wage of K25 000, according to figures from the Centre for Social Concern (CfSC).
In an interview on Tuesday, Consumers Association of Malawi (Cama) executive director John Kapito said consumers are now feeling the pinch of price hikes.
“Indeed, all these have a knock-off effect on consumers’ disposable incomes, especially in a country where it is rare to see drastic salary increases or adjustments to cushion the ever high cost of living.
“It is unfortunate that these increases are coming at a time consumers do not have money. But industry and government is not spared as they will either have no one to buy their products or pay taxes,” he said.
Economics Association of Malawi (Ecama) executive director Maleka Thula, in an earlier interview, said while the recent increases in electricity tariffs and fuel pump price was unprecedented, it will more likely worsen the inflation outturn in the remaining months of the calendar year.
“If market players deem the increase in current inflation as temporary, price increases are not expected to persist. Thus inflation outturn is likely to remain as earlier projected for 2018 and at five percent target in the medium-term,” he said.
Earlier, Malawi Congress of Trade Unions (MCTU) secretary general Dennis Kalekeni observed that much as the union is aware that the minimum wage does not have to reflect the cost of living, the gap does not have to be too wide.
“This situation could have been avoided if we had tamed corruption, cashgate and promoted policies that encouraged more of production,” he said.
In October 2016, Treasury raised the minimum wage by 24 percent from K19 000 to K25 000 a month.