By Kingsley Jassi:
The Reserve Bank of Malawi (RBM) has suggested a proactive approach in dealing with possible economic threats being posed by external and internal shocks.
The central bank cites mounting geopolitics, trade wars and price volatility on the global market as possible risks to look out to while, domestically, rising inflation and weak production further pose continued risks to the ailing economy.
This is contained in the latest monthly market intelligence brief by the central bank, which also acknowledges a mixed outlook in the region.
“Globally, fluctuating oil prices, geopolitical risks and trade tensions underscore the importance of proactive strategies to mitigate external shocks,” the bank says.
On the domestic front, the central bank has called on stakeholders to be mindful of the persistent rise in food inflation and challenges posed by limited domestic supply, necessitating “urgent policy interventions” that help to boost agricultural productivity and ensure food security.
“Furthermore, maintaining exchange rate stability is crucial for overall macroeconomic resilience and will require careful policy coordination alongside efforts to address food inflation,” the central bank further suggests.
Going forward, the RBM’s monthly publication says carefully tailored monetary and fiscal policies will be essential to achieving price stability and fostering sustainable economic growth, both domestically and within the broader global context.
There was no immediate reaction from fiscal authorities; however, experts acknowledge lack of policy coordination between the fiscal and monetary authorities, leading to contradictory policy stances.
For instance, while the central bank has been tightening money supply to contain inflation, the economy has seen growth in money supply reaching as high as 48.8 percent in September.
This had, earlier, been attributed to expansionary fiscal policy exerting more pressure on both foreign reserves and inflation.
In its recent Malawi Economic Monitor, titled the ‘rising cost of inaction’, the World Bank hinted at this as one key factor exacerbating macroeconomic imbalances, worsening the debt situation, among other pressure areas.
As Finance Minister Simplex Chithyola Banda is expected to present the 2025-26 national budget today, several experts expect a paradigm shift that sees sustainable spending, characterised by low deficit and production-oriented budget.
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