Misanet / The Chronicle, 19 May - There are strong fears among economic analysts that Malawi's pending budget (2005-06), which is pegged at Kwacha 113 billion (euro 761 million), will push inflation further upwards, raising commodity prices to unsustainable levels especially for the impoverished masses.

Last year's budget, presented on 3 September 2004, was pegged at Malawi kwacha 89.8 billion (euro 605 million) and the Minister of Finance then said inflation would go up to 20 percent by June this year. He promised that inflation would then start to drop thereafter. However, month-to-month inflation since then has been rising relentlessly. According to Malawi's National Statistical Office (NSO), month-month inflation is now hovering at around 14 percent.

Several Malawian economic analysts have predicted that inflation would skyrocket on account of the shortages of the country's staple food, maize as well as the introduction of the Malawi Rural Development Fund (MARDEF), which has been increased to kwacha 5 billion from kwacha 1 billion.

The Standard Banking Group of South Africa in an April economic commentary for Malawi has said that average inflation for 2005 will be pegged at 14.9 percent. The bank had earlier estimated a lower average inflation rate of 10.6 percent for 2005 but has felt compelled to hike the rate upwards due to higher than anticipated food prices.

The country is currently in the midst of a food shortages, especially the staple crop maize, which contributes about 60 percent to the Consumer Price Index (CPI).

Malawi's government has planned to import 250,000 tonnes of maize, of which 150,000 would be for humanitarian aid and 100,000 for commercial purposes. Money amounting to kwacha 5.2 billion is to be set aside for the importation of the staple crop. The Agriculture Ministry estimates the shortage to be 430,000 tonnes whereas NSO says the deficit stands currently at 900,000 tonnes.

The economic lobby group, the Malawi Economic Justice Network (MEJN) says they also anticipate inflation to go up because there would be more money in circulation and also the shortage of food. Both the President's MARDF and the shortage of maize, they believe would trigger off a higher rate of inflation.

Deputy National Coordinator, Mavuto Bamusi told 'The Chronicle' on Friday, the buying of maize would create a forex imbalance as more money is going to be used up for the purchase of maize. He also said fuel prices, which have been going up internationally will also add onto the pressures of inflation.

Some of the economists contacted by 'The Chronicle' said they could only comment on the matter after they get the exact details of the budget. Meanwhile, the commodity prices have been on an upward spiral for the past months owing to the anticipated month-to-month inflation increase.

This is having a direct adverse impact on most of Malawians' disposable incomes. Rising inflation will adversely affect more than 75 percent of the country's population who live on less that one dollar a day (approximately kwacha 113, on the official exchange rate).

By Chikondi Chiyembekeza

© Misanet / The Chronicle

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