The Reserve Bank of Malawi (RBM) has revised upwards its 2021 inflation rate projection from 7.6 percent to an average 8.4 percent.
In its Statement of the Monetary Policy Committee (MPC) Second Meeting of 2021, the central bank said the revision has, among others, taken into account the impact of the lagged effects of the upward adjustments of fuel prices implemented on March 9 and an increase in electricity tariffs effected on March 31 this year.
Reads the statement signed by RBM Governor and MPC chairperson Wilson Banda: “Headline inflation rose to 9.4 percent in March 2021 from 7.6 percent in December 2020, mostly on the back of rising food and fuel prices.
“Meanwhile, the forecasts suggest an elevated inflation path in the period ahead compared to the First 2021 MPC forecasting round, as headline inflation is currently projected to average 8.4 percent in 2021, up from 7.6 percent projected during the previous MPC meeting.”
Since the beginning of the year, inflation has been on the rise, increasing to an average of 8.5 percent in the first quarter (January to March) of 2021 from 7.5 percent in the fourth quarter (October to December 2020).
The increase was driven by non-food inflation which accelerated to 6.3 percent in the first quarter of 2021 from 4.6 percent in the fourth quarter of 2020.
In contrast, food inflation remained unchanged at the end of 2020 at an average of 10.6 percent.
“This development largely reflects the lagged effects of the upward adjustment in domestic fuel pump prices effected in December 2020, a further increase in domestic pump fuel prices implemented on 9th March 2021, as well as the continued depreciation of the kwacha,” said Banda.
RBM had earlier projected the 2021 first quarter inflation rate at 8.1 percent.
Treasury, on the other hand, anticipates average inflation rate to remain in single digits at 7.8 percent and 8.6 percent in 2021 and 2022 respectively, largely reflecting contained food inflation.
Thereafter, it is expected to gradually converge towards the five percent medium-term inflation objective.
In the medium-term, Treasury, through the RBM, said it is committed to the implementation of a forward-looking monetary policy framework.