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Home Business Business News

Malawi’s inflation soars to 11.4 %

by Johnny Kasalika
23/04/2012
in Business News
2 min read
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fuel petroda | The Nation OnlineMalawi’s year-on-year headline inflation went up by 0.5 percentage points to hit 11.4 percent in March from 10.9 percent in February triggered by a rise in non-food items, the National Statistical Office (NSO) has said.

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For three months in a row, inflation is hovering in the double digit, a situation likely to push the cost of living and throw more people into the ultra-poverty trap in which their earnings are less than $0.30 cents (K50) per day.

The rise confirms analysts’ prediction that inflation will continue to climb in the short to medium term largely affected by a rise in non-food items that forms the main component of core inflation—a measure of inflation which excludes certain items that face volatile price movements, notably food and energy.

Both the urban and rural inflation went up to 14.9 percent and 9.5 percent from 14.4 percent and 8.9 percent respectively, according to the NSO’s Stats Flash.

“Although food costs have started decelerating, the upward trend in headline inflation continues due to the unabated rise in non-food costs” said the NSO’s statement.

Analysts have been keeping their fingures crossed for an ease in inflation due to maize harvests which, as part of food, accounts for 58.1 percent of the Consumer Price Index (CPI)—a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care.

In its Basic Needs Basket assessment for March, the Centre for Social Concern (CfSC) said the cost of living is beginning to stabilise in Lilongwe, Blantyre and Zomba largely because of increased supply of most food items.

Beginning March through to April, most of the urban and rural households harvest their farm produce, a situation that beefs up their depleting food stocks.

The rise in the rate of inflation proves true the prediction by an investment advisory firm Nico Asset Managers which forecast the increase in non-food inflation, a development that will have devastating impact on the already tax-squeezed Malawians courtesy of the 2011/12 zero-deficit budget.

The Economist Intelligence Unit (EIU), in its March 2012 report for Malawi, forecast inflation of 12.5 percent in 2012 as the kwacha depreciates more gradually, increases in international oil prices, continued scarcity of foreign exchange and an overvalued kwacha which authorities have refused to devalue.

“Non-food inflation is expected to accelerate in 2012 owing to shortages of fuel caused by a lack of foreign exchange to pay for fuel imports, black market trading of the local currency and higher taxes. This continues to drive up black market fuel prices, pushing up transport costs and boosting food prices in urban Malawi,” said the EIU.

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