January inflation rate surpasses RBM target

Malawi’s year-on-year headline inflation rate for January, as measured by the Consumer Price Index (CPI), quickened by 2.4 percentage points to 25.9 percent from 23.5 percent in December 2013.

Already, the January rate, according to the National Statistical Office (NSO), has surpassed this year’s Reserve Bank of Malawi (RBM) highest projected rate of February at 25.6 percent.

This means that by the time the February inflation figures will be released, the rate will have increased even higher, eating too much into consumers’ disposable income.

According to the NSO Stats Flash, the January CPI rose along with urban rates to 37.2 percent while the rural inflation peaked at 24.4 percent.

In its Monetary Policy Committee (MPC) meeting in February, RBM noted that inflation, the persistent increase in the general price level of goods and service in an economy, was expected to peak—to reach a maximum—at 25.6 percent in February, largely due to the rising food prices and lagged impact of the kwacha depreciation.

The MPC further noted that after peaking in February, inflation is expected to begin decelerating in March as a result of the expected seasonal appreciation of the kwacha and improvements in the food supply situation.

However, meeting noted that there were risks to inflation emanating from fiscal pressures during the election period.

The kwacha has been appreciating against all it trading currencies, gaining by about three percent against the dollar since January this year.

But regardless of the appreciation of the local unit, the Malawi Energy Regulatory Authority (Mera) in February raised the price of fuel which experts fear may push up the February inflation.

Mera noted that the combined effect of the movement of the Free on Board (FOB) prices and exchange rate of the kwacha resulted in an increase in the landed cost of petrol, diesel and paraffin of 8.88 percent, 12.02 percent and 12.73 percent respectively.

Malawi has since the liberalisation of the exchange rate in May 2012, been experiencing high inflation rates.

The CPI peaked at 37.9 percent in February 2013 before falling to 21.7 percent in September of the same year.

Government expects inflation to fall but at a higher rate than projected.

According to the International Monetary Fund (IMF), end-2014 inflation has been raised from 5.8 percent to 9.7 percent while the annual average has been increased from 8.1 percent to 15.1 percent.

Comparatively in the region, Malawi has one of the highest inflation rates with the country’s Comesa harmonised inflation rate for December 2013 standing at 23.2 percent, about two times the regions rate.

The trade bloc’s December Harmonised Consumer Price Index (HCPI) released in January indicated that Malawi’s inflation was the second highest in the region after Sudan’s 34.6 percent.