A World Bank Group report says higher food costs contributed to inflation in Malawi, Mozambique and South Africa and that the surge in inflation weighed heavily on private consumption and forced central banks to tighten policy.
The report, titled Global Economic Prospects: Weak Investment in Uncertain Times released on Wednesday, says that sustained decline in commodity prices has dealt a major setback to many sub- Saharan African countries including Malawi.
Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira, in an interview on Tuesday, agreed with the report’s contents, saying most countries in Southern Africa have no maize, a development which pushed up inflation.
He said: “The report is spot on because in Southern African region, there was shortage of maize and what we had to do is to reduce liquidity to contain the second round inflationary pressures.
“We are trying our best to manage the liquidity in the system because when there is too much money chasing too few goods that is a problem.”
The report also says continued drought could adversely affect the economic growth of Malawi and Zimbabwe among other countries in the World.
“Deep currency depreciations, coupled with rising food prices due to drought, pushed inflation into double digits [on average] in 2016. Headline inflation accelerated to 41.1 percent in Angola and was above 15 percent in Ghana, Malawi, Mozambique and Nigeria,” says the report.
Inflation remained above the central bank target range in South Africa, at 6.6 percent while higher food costs contributed to inflation in Malawi, Mozambique, and South Africa, says the report.
“The surge in inflation weighed on private consumption and forced central banks to tighten policy. However, in several commodity exporters [Angola and Nigeria], real interest rates have remained negative, suggesting that further policy tightening may be necessary to anchor inflation expectations and to relieve pressure on their currencies,” reads the report in part.
Some of the policy challenges cited in the report include the sustained decline in commodity prices, which has dealt a major setback to the region, threatening recent progress on poverty and revealing sizable macroeconomic imbalances in some countries.
”Regional per capita output contracted in 2016, with growth and employment slowing sharply in the large commodity exporters.
“A significant number of sub-Saharan Africa’s poor live in countries where per capita income growth was negative in 2016,” adds the report. n