Rising prices to push people into poverty
The International Food Policy Research Institute (Ifpri) says the rise in global commodity prices has raised Malawi’s national poverty headcount rate by 2.1 percentage points.
In its report, Ifpri said the increase is equivalent to an additional 394 000 people falling below the international poverty line of $2.15 (about K2 216) per day.
In its recent country analysis on the impacts of the Ukraine-Russia war and global crises on poverty and food security, Ifpri said the crises could also cost the economy 1.3 percent of its gross domestic product (GDP) due to the combined effects of negative terms of trade shock and reduce the working population by 2.8 percent as falling production leads to job losses.
Reads the analysis in part: “Overall, the combined effect of the world price shocks is a decline in consumption for all households, but much larger declines for households toward the lower end of the income distribution.
“National consumption spending, including the value of home consumption, falls significantly by 5.3 percent.”
The report said the percentage decline in consumption is larger than that in GDP because households are hit twice by rising prices and falling incomes, adding that food accounts for a much larger share of household consumption.
The institute said with the fall in GDP, most of the decline in consumption is driven by the fuel and fertiliser shocks, which raise the market price of most consumer goods and services in the country.
Overall, the fuel shock accounts for 50 percent of the absolute decline in household consumption followed by the fertiliser at 40 percent while food has a modest impact, accounting for 10 percent of the fall in total household consumption, according to the report.
“Given the large size of the agriculture sector, it accounts for more than 40 percent of losses in the country’s total GDP,” said Ifpri in the report.
The Ukraine-Russia conflict has fuelled severe price shocks in food, energy and fertiliser, given the centrality of both the Russian Federation and Ukraine on the global market, which has not spared Malawi.
Influenced by increases in-bond landed costs of fuel and skyrocketing global oil prices, Malawi Energy Regulatory Authority recently raised domestic pump prices of petrol by 44.92 percent to K1 999 from K1 380 per litre and by 30.61 percent for diesel to K1 920 from K1 470 per litre.
Owing to supply disruptions out of Ukraine, fertiliser is now selling at an average of K65 000 per 50 kilogramme bag from an average of K37 000 during the same period last year.
The rising prices continue to exert pressure on the country’s inflation rate, recorded at 19.1 percent in May 2022 up from 15.7 percent in April, according to the National Statistical Office.
In an interview on Friday, Consumers Association of Malawi executive director John Kapito said rising global prices have coincided with dwindling incomes and the 25 percent devaluation of the kwacha, bringing tough times for consumers.
“The current economic situation is not sustainable. Consumers need market interventions by government because people are tired and hurt,” he said.
Minister of Agriculture Lobin Lowe is on record as having said those on Affordable Inputs Programme should anticipate fertiliser price hike from the K7 500 contribution made the previous season.
