By Benadetta Chiwanda Mia:
Economic think-tank Economics Association of Malawi (Ecama) has reiterated that persistent fiscal and exchange rate pressures will culminate in high inflation levels in Malawi throughout 2025.
This follows another recent prediction from the association and Oxfam that inflation would average 24.2 percent in 2025, and further drop to 17 percent in 2026.
These projections are based on assumptions of improved climatic conditions and better agricultural performance in the 2024-25 season, which should result in food availability.
However, other institutions have varying inflation forecasts for Malawi.
For example, the International Monetary Fund sees inflation easing to 15 percent next year, the World Bank estimates 27.3 percent inflation average for 2025 while the Economics Intelligence Unit anticipates the rate to be 28.3 percent, mainly due to concerns over deficit financing.
In an interview, Ecama President Bertha Chikadza said fiscal pressures were likely to escalate, particularly as 2025 is an election year.
“The government will want to please voters with increased spending, and there will be heightened travel and expenditure related to campaigning. This could lead to a surge in broad money (M2), jeopardising efforts to manage inflation.
“Fiscal consolidation might prove challenging in 2025 due to increased government expenditure. The government will likely resort to borrowing to meet its spending needs, resulting in a lack of fiscal discipline,” Chikadza said.
She added that continued foreign exchange shortages were expected to heighten speculative activity and spread misinformation about the currency, further inflating expectations.
However, Finance Minister Simplex Chithyola Banda remained confident that the economy would rebound in 2024, projecting a 4 percent growth.
Presenting the Mid-term Budget Statement to Parliament, Chithyola Banda said, in the spirit of spearheading recovery of the economy, the government had stepped up efforts in addressing the challenges of forex, fuel, food and fertiliser shortage.
“Government has, this year, mobilised over 931 medium and large-scale farmers, commanding nearly 40,000 hectares, to produce maize, rice, soya, groundnuts, tobacco and cotton.
“The country has generated about $10.3 million for implementation of community livelihoods and natural resources conservation in Rumphi and Nkhotakota districts. The government continues to prioritise catalytic investment in the three identified sectors of agriculture, tourism and mining,” Chithyola Banda said.
Meanwhile, Malawi’s headline inflation slowed to 27 percent in November 2024, down from 32.4 percent in October, marking a 5.4 percentage point decline.
This also reflects a 6.1 percentage point drop from the 33.1 percent inflation rate recorded in November 2023, primarily due to the 44 percent devaluation of the Kwacha.
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