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Malawi’s inflation now at 33.3 percent

Malawi’s year-on-year inflation has continued its upward spiral. The National Statistical Office (NSO) figures for November show that the rate climbed to 33.3 percent, a 2.7 percentage points increase from 30.6 percent the month before.

The statistical body says the galloping inflation is being fuelled by a rise in prices of food and non food items.

The rise in inflation is a blow below the belt for consumers. This means their purchasing power will continue to dwindle at a time the cost of living is rising to unsustainable levels pushing more people into the utral poor bracket.

“Food inflation has gone up by 33.4 percent compared to 3.5 percent during the same period last year. Core inflation [which excludes certain items that face volatile price movements, notably food and energy] has gone up by 33.3 percent compared to 14.2 percent during the same period last year,” said the NSO in its Stats Flash.

The NSO said the urban and rural rates are 38.5 percent and 30.2 percent, respectively.

The statistical body has attributed inflation rise to the recent price adjustments of fuel, house rentals, electricity and beverages and tobacco.

The May 7 devaluation of the kwacha by 49 percent and its flotation is also being blamed for the rise in inflation.

The kwacha is now on a free-fall trading at K338 to a US dollar in authorised dealers banks (ADBs) from K250 on the day of the devaluation.

Investment advisory firm, Nico Asset Managers Limited, in its economic review for November  2012 has forecast a slowdown in food inflation due to the recent injection of relief maize which has, somewhat, dampened demand for the grain on the domestic market which could cushion increases in food inflation.

Food accounts for 58.1 percent in the consumer price index (CPI).

Consumers Association of Malawi (Cama) executive director John Kapito could not be reached over the weekend, but he earlier told Business News that the rise in inflation shows how much the devalued kwacha can bring in the home.

“This trend [the rise in inflation] has created so much poverty. The quality of life has gone down and that can be seen in people’s misery in the streets,” he said.

The Reserve Bank of Malawi (RBM) seems to be grappling with various ways to tame runaway inflation.

Early this month, the RBM raised the bank rate by 400 basis points to 25 percent from 21 percent to urgently stabilise the kwacha and rein in inflation.

Economic analysts have in recent times argued that the rise in inflation could also reduce savings affecting funds available for capital investments resulting in low private sector activity and slow economic growth.

Already, the gross domestic product (GDP) growth rate is this year expected to slow to 1.6 percent from an initial estimate of 4.3 percent owing to a negative growth in manufacturing and agriculture sectors, according to RBM Governor Charles Chuka.

Chuka said in September that they estimate inflation to be between 21 percent and 24 percent by end-year with an average of between 17.5 percent and 19.8 percent for the year.

But with the figures coming from NSO these projections have not been met with only one month’s figures remaining.

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