Malawi's One Digit Inflation Projection not Realistic-Economist

An economist has cast doubt on the country's ability to lower inflation rate to five or seven percent from the current 35 percent in 2024-2025 fiscal year.

The Reserve Bank of Malawi (RBM) recently projected a drop in the inflation in the medium to long term that would bring more stability to the economy.

But speaking to Zodiak Online, economic expert Sam Chiwaula Snr said it is impossible for an agro-based economy to drop it's inflation when rains have not been favourable in a couple of farming years, warning that Malawians should instead expect a surge in food inflation.

"I think that the target is not realistic. The reason is the rains haven't been that favorable this year. And if you look at the previous year, the harvest was not that adequate," he said.

He added: "And come to ESCOM, you realize what the manufacturers are relying on ESCOM power. ESCOM has been increasing the cost of power so frequently that even the producers of goods and services, sometimes find it difficult or expensive to produce. As a result, this is transferred to the consumers. So, we should, generally, expect inflation to rise, rather than fall."

RBM spokesperson, Dr. Mark Lungu said the country should at all times desire a low inflation rate of less than five percent.

In a written response, Dr. Lungu, however, agreed that "attaining such level requires a number of adjustments to the economy, including unlocking supply chain bottlenecks which are the major source of food inflation currently at 44.9 percent".

Dr. Lungu added that increase in tariffs and the El Niño induced weather pose threats to inflation outcome going forward.

Meanwhile, the Electricity Supply of Malawi (ESCOM) is set to revise upwards tariffs between April and May after the expiry of the government-ordered tariff suspension.

Last week, the RBM raised the policy rate by 200 basis points to 26 percent to which commercial banks responded to by raising the reference rate to 24.9 percent from 23.6 percent.

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Last modified on Tuesday, 27/02/2024

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