Firm warns of higher prices

Malawi’s inflation could accelerate in the coming months, further squeezing household incomes and consumer spending, a research firm has warned.

United Kingdom-based Business Monitor International (BMI), a research unit of Fitch Solutions, said official inflation figures may understate the pressure on households because widespread use of the parallel foreign exchange market has pushed the actual cost of imported goods above official prices.

Although headline inflation fell from 24.9 percent in January this year to 20 percent in August, BMI expects price pressures to accelerate in the coming months, particularly if the kwacha is devalued as authorities seek a new International Monetary Fund programme.

“We believe official data likely understate the true pressure on households given the widespread use of the parallel forex market and resulting divergence between official prices and the actual cost of imported goods,” said BMI.

The warning comes against the backdrop of rising non-food costs, with Employers Consultative Association of Malawi (Ecam) reporting that the cost of non-food items rose by 30.65 percent from K233 905 to K305 607 between January and June 2026.

Ecam said the increase contributed to a 9.73 percent rise in transport costs to K1.129 million from K1 million, despite food prices declining during the period.

National Statistical Office reported that year-on-year headline inflation averaged 23.6 percent in the first half of 2026, down from 28.9 percent over the same period last year.

However, the Reserve Bank of Malawi (RBM) has warned that rising non-food inflation and domestic fuel price adjustments could undermine the easing inflation trend despite lower food inflation.

In its 2026 Monetary Policy Report, RBM projected annual inflation at 24.8 percent, down from 28.4 percent in 2025, but said persistent risks could offset gains from easing food prices.

Centre for Social Concern programme officer for economic governance Agnes Nyirongo said volatile transport costs, driven by foreign exchange shortages, were also hurting businesses and households.

“High inflation is not only squeezing households, but it is also stifling business growth,” she said, adding that rising production and transport costs were being passed on to consumers, further fuelling inflation in a vicious cycle.

RBM Deputy Governor for operations Kisu Simwaka, writing on his Facebook page, argued that single-digit inflation is achievable with effective policy coordination between the central bank and government.

“Malawi’s inflation problem has a solution. The economy is not an outlier. Other countries in the region have shown that single digit can be achieved and sustained,” he said.

Simwaka said inflation is not controlled by a single instrument, observing that it requires a central bank that is operationally independent in its mandate, a government that exercises fiscal discipline, foreign exchange buffers that are adequate, less dependence on imports and policy credibility.

“If we put this system in place, five percent inflation by 2030 is not an aspiration. It will be an outcome,” he said.

University of Malawi economics lecturer Edward Leman said in an interview that future inflation trends will hinge on domestic food supply, though global fuel prices and exchange rate stability remain critical.

“There are reasons for cautious optimism. Malawi’s inflation is predominantly food-driven and a favourable agricultural season could help ease pressures,” he said.

Meanwhile, BMI forecasts real gross domestic product growth to slow from an estimated 2.5 percent in 2025 to 1.7 percent in 2026 before recovering modestly to 1.9 percent in 2027, with weak private consumption remaining the main constraint.

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