Malawi inflation in single digits

LILONGWE – Inflation in Malawi has dipped into single digits for the first time in four years, increasing the chances of further interest rate cuts in the southern African nation, Finance Minister Goodall Gondwe said on Tuesday.

“This decline is due to abundant food on the market and the low cost of goods due to stability in non-food inflation,” Gondwe told the country’s parliament as he announced that inflation in January fell to 9,6 per cent on an annualised basis. It was 10,1 per cent in the previous month.Non-food inflation dropped to 9,4 per cent compared to 9,6 per cent in December.Gondwe’s announcement is expected to add to the downward trend of interest rates in the impoverished nation, which has seen its fortunes improve since it won massive debt relief late last year.The Reserve Bank of Malawi slashed lending rates to 20 per cent from 25 per cent in November following the decision by the International Monetary Fund (IMF) and World Bank to cancel the bulk of the country’s US$2,9 billion foreign debt.”We expect within the next coming months to have even lower figures on interest rates with the ever decelerating inflation rates,” Gondwe said.Malawi remains one of the world’s poorest nations with annual per capita income of about US$160.The country needs to further strengthen governance, improve transparency and tackle corruption, says the IMF.There are, however, concerns that government spending could undermine the progress made on the fiscal front.On Tuesday, Gondwe asked legislators to pass a US$2,5 billion supplementary budget that would see government spend much of the savings from debt relief.Opposition members baulked at the proposal, saying they would block the mini-budget unless the government explained how it had spent funds earmarked to build a road in the northern part of the country.”Parliament needs an explanation from the minister to tell us how that money was used or it will be very difficult for legislators to pass this,” said Sam Mpasu, spokesman for the opposition United Democratic Front.President Bingu wa Mutharika’s administration is also accused of failing to allocate donor funds for the road, diverting the money to other areas.The president has denied the charges.Nampa-ReutersIt was 10,1 per cent in the previous month.Non-food inflation dropped to 9,4 per cent compared to 9,6 per cent in December.Gondwe’s announcement is expected to add to the downward trend of interest rates in the impoverished nation, which has seen its fortunes improve since it won massive debt relief late last year.The Reserve Bank of Malawi slashed lending rates to 20 per cent from 25 per cent in November following the decision by the International Monetary Fund (IMF) and World Bank to cancel the bulk of the country’s US$2,9 billion foreign debt.”We expect within the next coming months to have even lower figures on interest rates with the ever decelerating inflation rates,” Gondwe said.Malawi remains one of the world’s poorest nations with annual per capita income of about US$160.The country needs to further strengthen governance, improve transparency and tackle corruption, says the IMF.There are, however, concerns that government spending could undermine the progress made on the fiscal front.On Tuesday, Gondwe asked legislators to pass a US$2,5 billion supplementary budget that would see government spend much of the savings from debt relief.Opposition members baulked at the proposal, saying they would block the mini-budget unless the government explained how it had spent funds earmarked to build a road in the northern part of the country.”Parliament needs an explanation from the minister to tell us how that money was used or it will be very difficult for legislators to pass this,” said Sam Mpasu, spokesman for the opposition United Democratic Front.President Bingu wa Mutharika’s administration is also accused of failing to allocate donor funds for the road, diverting the money to other areas.The president has denied the charges.Nampa-Reuters