Continued rise in inflation rate in Malawi’s economy suggests a national economic crisis—AFORD’s national director of economic affairs

* The annual inflation rate hit 34.3% in September 2024, up from 33.9% in August 2024

* With food inflation rate, which has a negative impact on the poor masses of Malawi, rocketing to 43.5% from 42% in August 2024

* Non-food inflation rate was marginal down by 0.9% to 21.8% during the same

* The role of the RBM as a custodian of monetary policy in maintaining price stability has totally been exhausted under the current economic conditions

By Duncan Mlanjira

Chief Economist, Chifipa Mhango, who is Alliance for Democracy (AFORD) national director of economic affairs, contends that “the continued rise in inflation rate in Malawi’s economy suggests a national economic crisis and a collapse of monetary policy impact in containing inflation rate”.

In a media statement copied to Minister of Finance & Economic Affairs and Minister of Information & Digitisation, Mhango — who is director of economic research & strategy for South Africa’s Don Consultancy Group (DCG) quotes latest data release by National Statistics Office that shows Malawi’s annual inflation rate continuing to rise for the sixth straight month.

He indicates that annual inflation rate “hit 34.3% in September 2024, up from 33.9% in August 2024, with food inflation rate, which has a negative impact on the poor masses of Malawi, rocketing to 43.5% from 42% in August 2024”.

“Non-food inflation rate was marginal down by 0.9% to 21.8% during the same, he said, adding that “the role of the Reserve Bank of Malawi (RBM) as a custodian of monetary policy in maintaining price stability in Malawi has totally been exhausted under the current economic conditions of Malawi, as further hiking of its policy lending interest rate from the current 26%, as its monetary policy tool is no longer impactful at containing inflation rate”.

“I will stress it again, as in my previous articles around Malawi economic challenges — the problems of the current economic crisis stem from fiscal mismanagement by the current government administration and lack of coherent implementation of trade and industry policy.

“The RBM is facing this inflation rate challenge, which is the 8th highest rate in the world and 3rd highest rate in Africa, in an environment where globally inflation rate across major economies and other developing economies are beginning to ease, attributed to moderation in food and energy prices, with central banks now cutting interest rates.”

“I totally sympathise with the professionals within the RBM, whom in my opinion, their professions have been at times under siege by political masters, for even their advice in being the Malawi Government Banker are at times ignored.

“AFORD’s view in this aspect, while in Government, will be to ensure the professionalisation of the Reserve Bank of Malawi with institutional independence approach in dealing with Malawi Government as its client and overall effective management of its operations — as defined by its six core mandates, and restrict excessive unproductive borrowing and openness in its advisory approach towards reckless spending, as these actions add to inflationary pressures in the Malawi economy.”

Mhango raises a concern that the Malawi has been under challenging monetary policy environment, with the bank policy lending rates from the RBM rising from 12% in September 2021 to current levels of 26%, representing 1400 basis points increase.

“This has squeezed consumers and businesses that depend on borrowing from Retail Banks to realise their dreams of borrowing to own a home or support business expansions or other operations.

“In the same period, overall inflation rate surged from 8.9% to current 34.3%, and food inflation rate from 10.9% to current 43.5%.

“This cannot continue — so I, therefore, put it openly that: the Reserve Bank of Malawi has exhausted its efforts, as the monetary policy has indeed collapsed due to the current non-listening Malawi Government.”

In conclusion, the Chief Economist Mhango and AFORD national director of economic Affairs indicates that “in real terms, Malawi’s latest headline inflation rate of 34.3% is the 8th highest in World after countries such as Argentina, Syria, Palestine, Turkey, Lebanon in globally and third highest in Africa, after South Sudan (107%) and Zimbabwe (57.5%).

“This cannot continue — AFORD, in its contribution while in Government, will ensure that a plan towards fiscal prudence and an effective implementation of Malawi industrialisation plan.

“The industrialisation plan shall be supported by trade policy that supports exports-oriented approach and import substitution based on a market intelligence and trade data analysis driven approach across products is prioritised to support an effective monetary policy environment.

“If the country inflation rate is the 8th highest in the world and 3rd highest in Africa, and featuring among war-tone countries, we are at war with ourselves.”