As the kwacha crashed against major trading currencies in 2013, water tariffs and fuel prices jumped by at least 25 percent pushing up inflation and the cost of living.
Nico Asset Managers Limited Annual Economic Report released last week indicates that in 2013 the Malawi Energy Regulatory Authority (Mera) effected six fuel price adjustments.
As a result of the fuel price adjustments, petrol rose by about 25 percent from K606.30 to K760 per litre, diesel, used mostly in industries and heavy goods vehicles, jumped by 29 percent from K597.40 to K770.70 per litre, apparently due to the weakening local unit.
During the year, water prices rose by about 33 percent from K0.43 per litre to 0.57 per litre.
According to the investment advisory firm, in the year, the kwacha weakened against all the major currencies—the dollar, sterling pound, euro and rand.
The kwacha fell by about 30 percent against the dollar, tumbled 33 percent against the pound sterling, slipped 5.7 percent against the rand and crashed by 35.6 percent against the euro.
The firm has warned that the depreciating kwacha will result in imported inflation through higher fuel and fertiliser prices and increased cost of living.
As a result of the falling kwacha and rising food costs, inflation rate has been rising. The November 2013 inflation rose to 22.9 percent.
The Economist Intelligence Unit (EIU) expects average inflation to rise to an average 28.6 percent in 2014 from 21.4 percent in 2013.
The EIU projects that in 2014 inflation will drop to 18.7 percent as a result of falling global food prices and aid-funded subsidies for poor households.
This runs counter to the single-digit inflation projection by the International Monetary Fund (IMF) this year, according to a statement after the third and fourth reviews of the three-year Extended Credit Facility (ECF).
EIU further expects inflation to moderate to an average 8.6 percent in the period 2014 to 2017 as productivity increases and as rising oil prices are offset by easing food prices.
The Centre for Social Concern (CfSC) the basic needs basket (BNB)—a monthly review of prices of food and non-food basket—released recently indicated that an average household living in Malawi’s four cities of Blantyre, Lilongwe, Zomba and Mzuzu, required about K110 000 in December 2013, a 30 percent jump compared to same month the year before.
The BNB food basket rose by 40 percent in 2013 to about K70 000. Specifically, to meet basic food needs; a household of six in December 2013 required an average K68 000 in Lilongwe, K72 000 in Zomba, K70 000 in Blantyre and K66 000 in Mzuzu.