Malawi’s annual headline inflation rate for 2016 was recorded at 21.7 percent, which is below the Reserve Bank of Malawi (RBM) revised target of 24.5 percent set in August, National Statistical Office (NSO) figures show.
The 2016 annual target is also 0.2 percentage points lower than the previous year’s annual rate of 21.9 percent.
The rate is 0.7 percentage points higher than the 21 percent annual target set by RBM in January and 3.7 percentage points below the revised target of 25.4 percent set in the fourth monetary policy statement in August.
This means that prices of goods and services in 2016 were a little softer than in 2015.
However, December inflation has increased by 0.1
percentage points to 20 percent from 19.9 percent the previous month.
This is better than the RBM December 2016 inflation rate projection of 22 percent.
During the same period the previous year headline inflation stood at 24.9 percent.
“Overall, food inflation stands at 24.4 percent from 24.8 percent in November 2016 while non-food inflation stands at 15.4 percent from 15.2 percent,” reads NSO Stats Flash.
Malawi’s inflation rate—largely pushed by food which has a weight of 50.2 percent in the consumer price index (CPI)—has since 2012 been in double digit lane and is one of the highest in the Southern African Development Community ( Sadc) and the Common Market for East and Southern Africa (Comesa) trade blocs.
In November last year, RBM Governor Charles Chuka told journalists that consistent implementation of a tight monetary policy stance and actions taken by government to reduce fiscal pressures, including from the Farm Input Subsidy Programme (Fisp) , among others, have helped to reduce inflationary expectation.
He said: “On balance, the exchange rate outlook is far much better than last year , implying a much less inflationary impact from the exchange rate. While utility rates might go up, the increase might be relatively less. Thus, year-on-year inflation will generally continue to slowdown.”
Economic analysts say fiscal contractions by government could be key to bringing down inflation, which can then bring down interest rates and spar economic activity.
International Monetary Fund resident representative Jack Ree called on authorities to bring down inflation if Malawi’s economy is to get back on track.
Currently, Malawi is reeling from a 12.4 percent maize deficit, triggered by El Nino weather phenomenon, which has contributed heavily to rising inflation; hence, resulting in rising bank rate and subsequent interest rates. n