December inflation rose to 24.9%, annual target missed

Malawi’s inflation rate for December 2015 rose by 0.3 percentage points to 24.9 percent from 24.6 percent the month before largely due to soaring food prices, figures from National Statistical Office (NSO) show.

The inflation rate as measured by the Consumer Price Index (CPI) shows that the annual headline inflation rate for 2015 stood at 21.9 percent compared to the annual headline inflation rate of 23.8 percent in 2014.

This means that fiscal and monetary authorities missed the inflation rate target in line with a forecast by Minister of Finance, Economic Planning and Development Goodall Gondwe contained in 2015/16 National Budget of an annual average rate of 12 percent in 2015.

But based on the annual average figures, it means that prices of goods and services in 2015 were a little bit softer than in2014.

Said NSO Stats Flash: “Overall, food inflation stands at 29.2 percent from 28.9 percent in November 2015.The increase in food inflation has been primarily influenced by rising costs of other food items other than cereals.

“The increase in non-food inflation has mainly emanated from housing, furnishing and  transportation costs.”

But in the third monetary policy statement, Reserve Bank of Malawi Governor Charles Chuka said in 2016, monetary policy will aim to bring down annual headline inflation to the target of 14.2 percent in June.

“In addition to the inflation target, the bank will aim at maintaining foreign exchange reserve coverage of at least three months of imports by June 2016,” he said.

Chuka said implementation of fiscal policy in 2015 was difficult given the additional social spending resulting from floods and sporadic drought conditions which was exacerbated by the shortfalls in external financing due to donor aid freeze. n