Rising maize prices have pushed up March 2018 inflation by 2.1 percentage points to 9.9 percent, figures from the National Statistical Office (NSO) published yesterday have shown.
During the review period, food inflation rose by3.3 percentage points to 10.6 percent while non-food inflation registered a meagre 0.3 percentage increase.
In the recent months, maize prices have been on the increase, selling at an average of K7 000 due to speculation in the wake of the looming hunger due to the dry spell and fall army worms, which are estimated to cut maize production by 40 percent or 210 740 tonnes and 10 percent or 73 201 tonnes respectively.
Prior to that, the price of the staple crop has in recent months been stable, on account of oversupply of the commodity on the market with government records indicating that the country is said to have about 240 000 tonnes of maize stock in grain reserves, enough to feed the nation.
Maize is Malawi’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates as it makes up more than 45.2 percent in the Consumer Price Index (CPI), an aggregate basket that determines the average rise in the cost of living.
In an interview yesterday, Catholic University dean of social sciences Gilbert Kachamba said that with a bigger chunk of inflation coming from food (maize), this will be the picture in the coming months.
“We should expect the inflation rate to be rising as it has been the trend for over the past three months. It’s a circle we are going through unfortunately,” he said.
Reserve Bank of Malawi (RBM) projects an inflation average of 10.5 percent in 2018, and expects to close the year at 9.5 percent despite the upside risks emanating from delayed fiscal adjustment in the lead-up to elections in 2019, and an upward adjustment in utility tariffs.
RBM Governor Dalitso Kabambe earlier said the monetary policy stance during the first half of 2018 will focus on entrenching disinflation and attaining the targeted five percent inflation in the medium term, and maintain a minimum of three months import cover of official foreign exchange reserves.
Economist at the pan-African policy think tank, African Institute for Development Policy (Afidep), Salim Mapila, however, urged government to be cautious in its financial dealings ahead of the 2019 Tripartite Elections, if the country is to sustain the current inflation gains.
Speaking earlier to Business News, Mapila said with Malawi economy characterised by a fiscally dominant regime as opposed to a monetary dominant regime, government’s financial dealings has a greater bearing on RBM’s ability to keep macroeconomic variables like inflation in check.