Inflation back to single digit

Post was last updated: January 21, 2019

By Taonga Sabola:

Just like a pendulum, Malawi’s headline inflation swung back to single digit in December as it hit 9.9 percent after just a single month in double digit bracket, the National Statistical Office (NSO) has said.

In November, headline inflation had threatened to runaway, hitting 10.1 percent as food and fuel prices surged.

But two fuel price slashes in recent months have helped to ease pressure on prices.

In its December inflation update released on Friday, NSO said headline inflation eased by 0.2 percentage points from 10.1 percent to 9.9 percent.

The development means inflation averaged 9.2 percent in 2018 as compared to 11.5 percent in 2017.

The Reserve Bank of Malawi (RBM) had predicted that inflation would average within the single digit bracket in 2018.

Though inflation fell in December, there are fears from the food market where prices of the staple food have started coming under pressure with the onset of the lean season.

As at last week, a 50 Kilogramme bag of maize was selling at an average price of K10,000 in Blantyre up from K7,500 in November.

But State-owned grain marketer, the Agricultural Development and Marketing Corporation, last week said Malawians should not panic during the lean period as it has enough maize at a price of K7,500 per 50kg bag.

Commentators have also warned that inflation could come under pressure in the first half of the year due to spending associated with the May 21 elections.

Malawi needs a low inflation regime to bring down interest rates which are among the highest in the region.

With the policy rate at 16 percent and base lending rates of commercial banks averaging 23.5 percent, Malawians are paying around 30 percent and above to borrow from banks.

Analysts believe it does not make business sense to borrow capital at such a high price.

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