The opening of Agricultural Development and Marketing Corporation (Admarc) markets to buy maize from traders will not thwart Reserve Bank of Malawi (RBM) single digit inflation target by December this year.
In an interview on Saturday, RBM spokesperson Mbane Ngwira said although there could be an impact to their projections as maize prices are an integral part to the assumptions, the central bank was still upbeat of meeting the target.
“Naturally, this could raise projections but this can only depend on our response or we may work to subdue the impact as the prices had come after we had made our assumptions,” he said.
On Friday, Admarc announced that it has opened markets for maize and will be buying the staple grain at K170 per kilogramme (kg) or K8 500 per 50 kg bag.
In a show of desperation, farmers have in recent months been selling their maize to traders at as low as K50 per kg or K2 500 per 50kg bag, a situation that helped to push down inflation rate to 12.3 percent as of May this year, according to the National Statistical Office (NSO).
Maize, as part of the food component, has a huge weight in the consumer price index (CPI) at 50.1 percent. CPI measures changes in the price level of market basket of consumer goods and services purchased by households.
In its fifth monetary policy statement released last week, RBM has projected the inflation rate at 10.7 percent and 8.5 percent in June and December 2017 respectively, banking hopes on better harvest and the stability of both the exchange rate and international oil prices.
The central bank said it will continue supporting the disinflation process by keeping the policy rate—the rate at which commercial banks borrow from the central bank as the lender of last resort—above the headline inflation.
“Monetary policy will continue to be geared towards achieving price stability and a single digit by the end of 2017, supporting a build-up of international reserves and providing room for sufficient credit to the private sector,” reads the statement signed by RBM Governor Dalitso Kabambe.
In an earlier interview, Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa urged fiscal and monetary authorities to consolidate achievements made towards attaining macroeconomic stability, including the easing of inflation by sealing all fiscal policy loopholes and monetary policy potential slippages.
Economic statistician Alick Nyasulu said there is a high probability of attaining the projected targets as food inflation is going down mainly as a result of a good maize harvest and lower prices.
However, Nyasulu cautioned that the push towards the targets may hinge on what authorities can control.
“Currency movements are very critical because slight movements can raise fuel prices that tend to have a ripple-multiplier affect over the entire consumption,” he said. n