IMF says 5% inflation target achievable

post was last updated: October 10, 2018

By Chimwemwe Mangazi:

The International Monetary Fund (IMF) has said Malawi could attain the five percent inflation target by 2021 if the system maintains a prudent economic management.

The Fund said the economy could even attain disinflation—a temporary slowing of the pace of price inflation by 2023.

Malawi’s headline quickened by 0.3 percentage points in August to 9.3 percent as escalating food prices continued to bite.

This was the second month for inflation to surge after making a u-turn in July.

Malawians have in recent months struggled with surging food prices and transport costs as well as a jump in electricity tariffs.

In an interview, IMF Resident Representative, Jack Joo Ree, however, said inflation could further slow down if the country builds on recently consolidated gains in key microeconomic fundamentals.

“If Malawi would be able to maintain the sound economic policies embedded in the ECF [Extended Credit Facility] programme, especially sound fiscal policies and sound monetary policies, it would be able to achieve a five percent inflation rate,” Ree said.

He said food prices, remained volatile, making it almost difficult for the country to sustainably grow its economy.

An IMF mission team which was in the country for the ECF review from September 25 said the general economic performance remains on track and the country could do well.

Reserve Bank of Malawi (RBM) maintained the inflation forecast of a single digit this year and five percent in the first quarter of 2021.

RBM remains upbeat that this year and moving forward, the inflation rate forecast and target will be achieved “as this is the direction that RBM has taken from the monetary and fiscal perspective”.

RBM spokesperson, Mbane Ngwira, said threats to inflation remain manageable.

We expect average inflation to be around nine percent at the end of the year 2019 and to average seven percent in 2020 and we are confident it will reach five percent by the first quarter of 2021, all things being equal,” Ngwira said.

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