The increase in the CPI has pushed the 2013 average inflation to 28.6 percent compared to 21.4 percent in 2012.
Nico Asset Managers in its November 2013 monthly economic report cautioned that the depreciation of the kwacha was expected to push up the 2013 average inflation to 28.6 percent from 26.9 percent projected earlier.
And, the investment advisory firm in its 2013 annual economic report released recently also warned that higher inflation will lead to higher prices and lower disposable incomes for both businesses and households.
The firm also noted that high inflation will lead to higher interest rates as people demand better returns consequently affecting lending rates which will reduce savings and investment.
But in the 2013/14 budget statement government expected that inflation would slow down to 14.2 percent by December 2013 and to seven percent by December 2014 arguing the economy was recovering.
In the wake of an aid freeze of about $150 million (about K60 billion ) in budget support by Malawi’s major donors in November last year, the Reserve Bank of Malawi (RBM) said it will tighten monetary to control inflation.
The central bank projected that inflation would settle at 23.1 percent in December 2013 and fall below 15 percent by June 2014 while the International Monetary Fund (IMF) targets single digit inflation by end this year.
The IMF in a press statement issued after the completion of the third and fourth reviews of the Extended Credit Facility (ECF) urged authorities to continue with a tight monetary policy and fiscal restraint to stabilise the exchange rate and achieve the inflation target by end-2014.
But recently the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) noted that inflation is likely to be out of control this year when cash-gate money starts vote buying.
Other experts have also argued that 2014 being an elections year authorities may grapple with controlling inflation as money supply increases and government expenditure balloons.
Some experts have also argued that food shortage will prompt inflation to rise further. Food and non alcoholics comprise about 50 percent of the CPI. People that require food assistance between January to March is pegged at 1.9 million according to government.