Inflation declines for the fourth consecutive month—RBM Deputy Governor Kisu Simwaka

* It continues to descend slowly, reaching 27.1% in June 2025 — supported by softening food prices

* Food inflation — “which accounts for more than half of the country’s inflation basket — dropped to 31.6% from 44.9% in January 2024

* Non-food inflation edged down to 20.1%, from 22% in January 2024 — but while inflation has been decelerating in recent months, it remains high

By Duncan Mlanjira

Ahead of the official launch of the Reserve Bank of Malawi (RBM) 60th Anniversary celebration that has been held today at Bingu International Convention Centre in Lilongwe, Deputy Governor, Kisu Simwaka posted on his official Facebook account on July 14 on Wednesday that that the country’s inflation “continues to descend slowly,  reaching 27.1% in June 2025 — supported by softening food prices”.

He quotes data from the National Statistical Office (NSO) which indicates that inflation has fallen from its peak of 35% in January 2024 while food inflation — “which accounts for more than half of the country’s inflation basket — dropped to 31.6% from 44.9% in January 2024”.

“Non-food inflation edged down to 20.1%, from 22% in January 2024,” he said, adding that “while inflation has been decelerating in recent months, it remains high”.

“High inflation affects everyone, but is especially painful for lower-income households that spend a larger share of their income on food, housing, transport and other necessities.

“But the good news is that the overall inflation environment is improving — the continued decline in inflation has opened potential policy space to reduce interest rates.

“At its upcoming meetings, the Monetary Policy Committee will assess progress based on the totality of the incoming data, the evolving inflation outlook and balance of risks.

“Based on this assessment, they will decide whether to reduce or hold the policy rate constant, while waiting for further data.

Simwaka further indicated that the RBM’s monetary policy “primarily looks at inflationary pressures coming from the demand side of the economy [and that] beyond monetary policy, it is important to realise that in a country like ours, inflation is affected by supply-side shocks”.

“For instance, food prices are the major driver of the recent high inflation, but all countries face these shocks and have different inflation rates.

“We have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates. Effective supply-side responses should help to keep food price pressures in check.

“There is need for an urgent action to tackle supply-side constraints to increase production. Improved agricultural productivity is the most effective way of addressing food shortages.

“This underscores the importance of partnership between relevant stakeholder institutions in addressing the challenges of inflation. Such partnership should involve regular consultations, sharing information and strategies geared towards seeking solutions to supply constraints or challenges to food production and distribution with the overall objective of price stability.

“That should form the basis for long-term policy on domestic prices and food security.”

Over the past four months, farmers have been selling their harvest from the last planting season, which has contributed to this decline — and in an interview with Malawi News Agency (MANA), economic analyst, Bertha Chikadza noted that this trend is encouraging, offering a glimmer of hope, especially regarding food prices, which have been a significant driver of overall inflation over the past year.

“This indicates that food prices are easing thanks to post-harvest supply improvements, especially in maize and legumes,” she said. “It also reflects the positive outcomes of a tight monetary policy that has remained vigilant in the face of rising inflation.”

Chikadza added that for the average Malawian, “this provides a breather, as the rate of price increases has slowed for four consecutive months, meaning the cost of basic necessities, particularly food, has eased slightly.”

However, another economic analyst, Mavuto Bamusi cautioned that the government must ensure it procures maize from farmers before they sell it to vendors, who often resell the same maize back to the public at inflated prices.

“While this is good news, products need to be safeguarded,” he said. “Traders should not exploit Malawians by purchasing food from them and selling it at inflated prices, as this could lead to a resurgence in food inflation.”

This situation aligns with RBM’s earlier projections that inflation would moderate by mid-2025. The recent decline in food inflation, which fell from 32.7% in May to 31.6%, signals a potential path toward stability in the cost of living for Malawians.

Meanwhile, on July 1, Simwaka also commented on the challenges of forex, acknowledging that over the past decades, Malawi has faced persistent forex shortages “primarily because our export earnings are insufficient to cover the import bill”.

“We import a lot more than we export. Every year, we import goods valued at US$3 billion, but only export goods valued at US$1 billion. This implies that our export receipts only pay for one-third of our import bill, leaving the country to look for foreign currency elsewhere to fund the remaining import bill.

“Our imports include fuel (US$560 million), fertilisers (US$350 million), reactors, boilers and machinery (US$250 million), vehicles (US$180 million), plastics and its articles (US$170 million), pharmaceutical products (US$164 million), electrical equipments (US$155 million), iron and steel (US$140 million), printed books and newspapers (US$115 million), textiles (US$110 million), and chemical products (US$100 million) — taking up 75% of the annual import bill.

“On the other hand, we have relied on a few primary commodity exports, namely tobacco (US$545 million), sugar (US$44.6 million), tea (US$68.7 million) and legumes/pulses (US$145 million) — representing about 80% of our annual export earnings.

“Meanwhile, we have large unrecorded transactions and financial sources of our imports under our balance of payments, including informal or illegal activities, estimated at US$500 million.”

Simwaka observes further that “given insufficient export earnings to fund our imports, we have increasingly relied on foreign aid flows, external borrowing, and financial derivatives like foreign currency swaps to pay for the the remaining two-thirds of the import bill — However, these have been unstable, leading to significant drawdowns on our foreign exchange reserves.

“However, prospects are improving — ongoing investments in commercial agriculture, energy, mining, manufacturing and tourism sectors are expected to boost economic activities and increase export earnings.

“It is worth noting that no single crop can replace tobacco in the country at moment. But a combination of crops and products can earn the country much more than tobacco.

He added that the Greenbelt Initiative “has designated approximately 1 million hectares of land, located within 20km of the country’s three lakes and 13 perennial rivers, as potentially suitable for irrigation agriculture, through investment by both local and foreign investors”.

“This will support government’s efforts to commercialise agriculture through mega farms. According to estimates, such irrigation expansion would require about US$2 billion for initial infrastructure and close to US$300 million as annual recurrent costs. 

“Currently, only about 100,000 hectares of land have been developed for irrigation. The mega farm programme is targeting value chains of agricultural exports including rice, wheat, groundnuts, sunflower, soya beans, pigeon peas, maize and dairy milk.

“The programme  targets a minimum of 175,000 hectares of land by 2028/29. Our kilombero rice is famed worldwide for its aromatic flavour. It is estimated that potential export earnings from kilombero rice could range from US$10 million to US$100 million — depending on production volume, market demand and prices. 

“Similarly, there are lucrative markets for legumes/pulses (groundnuts, beans, soya beans and pigeon peas) in India, Singapore and sub-Saharan Africa region. Based on conservative and optimistic estimates, potential earnings from legumes export range from US$400 million to US$1 billion per year.

Meanwhile, in emphasising that mining is positioned to become the largest export sector within the next five years, Simwaka observed that projects being undertaken require about 230 megawatts but Energy Generation Company (EGENCO) currently has a total installed generation capacity of 441.95 megawatts — with one major energy project coming up; the 360 megawatts Mpatamanga project.

“Furthermore, there is the construction of 50 megawatts Nanjoki power plant in Salima; Golomoti 28.5 solar PV power project; Salima 75.6 megawatts solar power project; 21 megawatts solar power project in Nkhotakota.

“Furthermore, Malawi and Mozambique are seeking funding for the Songwe dam project, which has potential of generating 180 megawatts to be shared 90 megawatts apiece by the countries.”

On manufacturing, the RBM Deputy Governor reported that “the process of establishing Special Economic Zones (SEZs) to fast-track industrialisation is underway. The SEZs and/or industrial parks have been established to attract export oriented investment in the manufacturing sector.

“These industrial parks will be specifically designed to accommodate plots for factory shells suitable for small, medium and even large factories. The industrialisation will lead to value addition of our exports, and increased foreign exchange earnings.

“Government has identified land for the development of industrial parks and designations as SEZs, namely Dunduzu in Mzuzu (72 hectares), Area 55 in Lilongwe (417 hectares), and Matindi in Blantyre (130 hectares).

“Government has also identified Chigumula in Blantyre (22.7 hectares) for development of an industrial park but not designated as an SEZ. With these developments, export of primary commodities should be a thing of the past.

“We should be able us to export textile instead of just cotton, cigarettes instead of tobacco, processed or parked fish instead of raw fish, leather instead of just hides, juice instead of raw mangoes or oranges, furniture in place of logs/wood.”—Reporting for MANA by Nyandema Mhango