Reserve Bank of Malawi maintains 5% inflation projection

Reserve Bank of Malawi maintains 5% inflation projection

Post was last updated: July 2, 2020

The Reserve Bank of Malawi (RBM) has maintained a five percent inflation target to be attained by end of first quarter of 2021, despite possibility of achieving it being threatened by possible effects of Covid-19 pandemic.

In an interview Wednesday, RBM Director of Communication and Protocol, Mbane Ngwira, said the Central Bank has not reviewed the target but is working on three scenarios that encompass impact of the pandemic on the economy.

“Based on developments on the food situation, fuel prices, and the exchange rate, we expect inflation to continue going down from the current 8.7 percent. However, the only risk that we have is the impact of the Covid-19 pandemic,” Ngwira said.

He added that initially, RBM projected inflation to average 8.8 percent by end 2020, however in a moderate scenario where the pandemic eases by June 2020; the average would come to 10.1 percent.

However, if the trend continues until December 2020, the Central Bank expects Inflation to rise to 14 percent.

Three years ago the RBM embarked on a medium term target to achieve a five percent inflation rate by 2021 which seemed on course until the Covid-19 pandemic surfaced.

Inflation has been on a down ward trend since December 2019 when it was recorded at 11.5 percent.

When presenting the provisional budget to Parliament on Tuesday, newly appointed Finance Minister, Felix Mlusu, said inflation is expected to average 9.4 percent.

He projected that policy rate would remain constant at 13.5 percent.

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