IMF flags fiscal deficit, food prices as key drivers of 34.3% inflation
The International Monetary Fund (IMF) has identified Malawi’s large fiscal deficits and rising food prices as primary contributors to the country’s high inflation rate, which currently stands at 34.3 percent.
According to the IMF, Malawi’s fiscal deficit, now at 10.2 percent of GDP, is the highest in sub-Saharan Africa, driven by ongoing fiscal challenges and efforts to recapitalize the Reserve Bank to address exchange rate losses.
The IMF report also highlights Malawi’s current account deficit, estimated at 18.7 percent of GDP, as a growing concern. This imbalance exerts additional pressure on official reserves, which were recorded at 119.9 million dollars—or just 0.5 months of import cover—in August.
Bertha Bangara Chikadza, President of the Economics Association of Malawi (ECAMA), has suggested that increasing Malawi’s export capacity could be a vital step toward reducing the trade imbalance.
“Strengthening our export sector would help narrow the trade deficit, potentially easing the strain on reserves and mitigating inflationary pressures,” she said.
The IMF’s observations underscore the need for sustainable fiscal reforms and efforts to diversify the economy, as inflation and reserve levels remain critical challenges for Malawi’s economic stability.
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