
Chief Economist Chifipa Mhango
* Inflation rate continues to break record highs in 10 years; now in the top five highest on the African continent and fourth highest
* Policy lending rate now also in top five highest on the African continent and on fifth spot
* I favour a move of keeping policy lending rates unchanged by RBM in its next MPC meeting scheduled for January 30-31 under the prevailing weak economic growth
* And also noting that the current policy lending rate is already high for Malawi economy—DCG Chief Economist, Chifipa Mhango
By Duncan Mlanjira
Inflation rate in the Malawi economy continues to rise to record levels in 10 years and now among the top five highest in Africa, with food prices escalation raising concerns on the well-being of most of its citizens.

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This has been observed by Chief Economist for South Africa-based Don Consultancy Group (DCG), Chifipa Mhango in a statement, and he quotes latest data released by Malawi’s National Statistical Office in, which shows that year-on-year inflation rate for December 2023 was 34.5% — an increase of 1.4% from November 2023.
“Food inflation rates came in at 43.5%, with non-food inflation rate at 22.8%. On a month-to-month basis, inflation rate for December 2023 was at 3.6%, with food inflation rate at 4.7% while non-food inflation rate is at 2.1%.”
Chifipa Mhango further says he sees a situation where the impact of the devaluation of the Malawi Kwacha by the Reserve Bank of Malawi (RBM) “is filtering strongly into the economy, as the latest inflation rate data suggests”.

The Reserve Bank of Malawi
“It is really concerning that the tool used to contain inflation rate in the Malawi economy, which is the lending policy rate by RBM, is already high at 24%.
“A further hike in the lending rates by the RBM in the next scheduled Monetary Policy Committee (MPC) meeting later this month, may bring more pain for consumers with flexible loan arrangements at retail banks, but also discourage business lending activities.”
Mhango also observed that the RBM took an aggressive approach towards its monetary policy position by hiking its lending rate by 600 basis points, from 18% to 24% between April and August 2023, “indicating a worsening inflation outlook for the Malawi economy”.
“However, the RBM kept its benchmark lending rate unchanged in its MPC meeting of 27th October 2023, under the motivation of a moderation in inflationary pressures and weak domestic economic growth.”

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On the global front, the DCG Chief Economist observed “unsettling picture of some major economies such as the USA, Euro Area, the UK, and India as reported by the National Statistics Offices, where latest annual headline inflation rates were all up from the previous months of November 2023, to reaching 3.4%, 2.9%, 4.0%, 5.87% in the month of December 2023 respectively”.
“Food prices were the dominant contributing factor to the upward movement in general, and with energy related base effects prevailing the most in the Euro Area.
“However, the latest position by the Central Banks in these major economies was to keep the interest rates unchanged.”
In closing, Chifipa Mhango indicated that in real terms, Malawi’s latest headline inflation rate of 34.5% is among the top five highest in Africa, and fourth in ranking — just behind countries such as Sudan (63.3%), Sierra Leone (52.16%) and Congo (42.5%); based on data from the various countries’ National Statistics Offices.
“Further on, Malawi’s interest rates (policy lending rate) are also among the top five highest in Africa, on fifth spot just after Zimbabwe (130%), Ghana (30%), Sudan (28.3%) and Congo (25%) as per data sourced from those countries’ Central Banks.
“While headline inflation rate has picked in Malawi, I would favour the view of the RBM’s Monetary Policy Committee keeping the policy lending rate unchanged at the current 24% level in its next meeting scheduled for 30th to 31st of January 2024, to balance up with the challenges of weak economic growth.”

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