Inflation hits 35.1%

Malawi’s headline inflation surged by 0.5 percentage points in January to hit 35.1 percent from 34.6 percent in December as prices of food and non-food items prices continued to explode.

The National Statistical Office (NSO) has beginning January 2013 rebased the Consumer Price Indices (CPI) to 2012 using updated household expenditure patterns derived from the 2010/11 Integrated Household Survey.

The development has seen the weight of food to the CPI shrinking from 58.1 percent to 50.2 percent. Food is seconded by housing, water and electricity at 12.6 percent; transportation at 11.7 percent; clothing and footwear at 5.9 percent; miscellaneous at 3.9 percent; communications at 3.6 percent; while furnishing and household as well as education contribute 3 percent each.

Other minor contributors to the CPI are alcoholic drinks and tobacco at 2.4 percent, health as well as restaurant and hotels at 1.3 percent each; and recreation and culture at 1.2 percent.

The country’s food and non-food prices have been on the rising trend since May 2012 when the Reserve Bank of Malawi (RBM) devalued and floated the kwacha.

Urban and rural inflation rates stand at 35.6 percent and 33.3 percent, respectively.

Analysts expect February inflation which is yet to be released to be even higher following the hike in fuel prices the Malawi Energy Regulatory Authority (Mera) announced on February 9, as well as the civil servants salary hike announced late last month.

Mera hiked the price of petrol from K606.30 per litre to K704.30 and that of diesel from K597.40 to K683.60.

The price of paraffin for industrial use rose from K509.90 to K591.40 while that of paraffin for domestic use remained at K171.

Government and civil servants recently agreed to increase salaries of the lowest paid civil servant by 61 percent (from K18,000 to around K29,000), and up the pay of the highest paid by five percent.

Ecama Executive Director Nelson Mkandawire warned that much as civil service needed a salary boost, the decision made could fuel further inflation management challenges.

“The businessman already thinks more money is coming on the market as such they are likely to use the kwacha floatation as a scapegoat to increase prices of goods, house or office rentals, etc.

“This wil l bite us even further. The flip side of the coin is that the same percentage increment could be swallowed up by the 30 percent PAYE requirement yet the businessman will still increase goods’ prices,” Mkandawire said.

He added that the decision will also likely put pressure on the Executive to increase local debts to cushion the unbudgeted spending on the 2012/13 budget allocations.

“So there should be more fears than joys out of such a decision. The wage bill is already close to what we generate in incomes through MRA so one wonders how such expenditure will be financed.

“It is my hope that taxes will not increase in the 2013/14 financial year to cover such decisions. It is also our hope that unnecessary expenditures will be avoided so that we can serve in order to finance the 61 percent salary hike,” Mkandawire said.