Malawi’s economy on life support, AFORD sounds alarm

LILONGWE, 18th OCTOBER 2024 – The Don Consultancy Group (DCG) Chief Economist Chifipa Mhango, who is also the Alliance for Democracy (AFORD) National Director for Economic Affairs says; “The continued rise in inflation rate in the Malawi economy suggests a national economic crisis and a collapse of monetary policy impact in containing inflation rate.”

“In the latest data release by National Statistics Office, the annual inflation rate in Malawi continued to rise for the sixth straight month to 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.” said the AFORD National Economic Affairs Director- Chief Economist Mhango

Mr. Mhango indicated that: “The Reserve Bank of Malawi’s role 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 in Malawi stem from Fiscal mismanagement by the current Malawi Government and lack of coherent implementation of Trade and Industry policy.” emphasized The AFORD National Director of Economic Affairs.

The DCG Chief Economist and AFORD National Director of Economic Affairs said: “The Reserve Bank of Malawi is facing this inflation rate challenge, which is the eighth highest rate in the world and third 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.”

The AFORD National Director of Economic Affairs further said that: “I totally sympathize with the professionals within the Reserve Bank of Malawi, 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 professionalization 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 by Malawi Government and openness in its advisory approach towards reckless spending, as these actions add to inflationary pressures in the Malawi economy.”

Mhango raised a concern that: “ The Malawi economy has been under challenging monetary policy environment, with the Bank policy lending rates from the Reserve Bank of Malawi 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 realize 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%.”

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