Consumers continue to spend more on basics despite inflation rate falling by half in the past 12 months.
Latest figures from the Centre for Social Concern (CfSC) June Basic Needs Basket (BNB) report show that at K164 395, the cost of living dropped by a mere 0.8 percent from K165 660 recorded the same period last year.
In May 2017, cost of living was recorded at K165 289.
However, this is despite the inflation rate falling by 11.3 percentage points, from 22.6 percent in June 2016, to 11.3 percent in June 2017, according to the National Statistical Office (NSO) Consumer Price Index (CPI).
This means that prices of goods and services are slower than they were the same period last year.
In the CPI, an aggregate basket for computing inflation, food, which in Malawian context is maize, has a weight of 50.1 percent. This means that any slight movement in the price either way has a bearing on inflation rate.
In the recent months, farmers have been selling the produce at as low as K50 per kg or K2 500 per 50kg bag.
The country’s annual rate of inflation has been falling steadily for more than 10 months since June 2016 helped by declining food prices, a relatively stable kwacha and lower international fuel prices.
In an interview on Wednesday, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said while it is imperative that consumers start seeing the ripple effects of the falling inflation, over reliance on maize in computing CPI has made it difficult for authorities to come up with figures that reflect the situation on the ground.
“As consumers, we are failing to feel the impact of the falling inflation rates because majority of our basics are imported and are even more competitive than the ones which are manufactured locally. As such, relying too much on falling maize prices to compute CPI gives the wrong picture.
“This is so because it’s not always that Malawians will have to eat maize products, no. Consumers will have to look at other things other than maize, and currently, there is a ban on maize exports which means, despite selling at very low prices, it is also in excess, hence, we see the falling inflation,” he said.
Kaferapanjira added that because the inflation is not reflecting the situation on the ground, it is hard for the same to help in policy decision making as doing so would be consequential.
Chancellor College economics professor Ben Kaluwa is on record having said the basic needs basket of the urban populating goes beyond food, which in Malawi is mostly maize.
In its fifth monetary policy statement titled Maintaining the Declining Path of Inflation, Reserve Bank of Malawi (RBM) Governor Dalitso Kabambe said the central bank will continue improving its market participants to convey its commitment to price stability and enhance the transparency and credibility of its monetary policy to better anchor inflation expectations. n