MALAWI: Urban poor hit by slew of price increases

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Submitted by IQ4News on Tue, 20/12/2011 - 2:03pm

BLANTYRE (IRIN) - Devaluation, fuel shortages and economic mismanagement have conspired to push staple food prices to “alarming levels” in urban areas of Malawi, where even catching a bus to work has become an unaffordable luxury for many, according to residents and analysts.

“At the moment, we are only concentrating on finding enough money for food and water,” said father-of-four Francis Tambula, who walks 7km every day from his home in Blantyre’s Ndirande township to his shop in the Limbe trading centre because paying for public transport would consume half of his income.

“We stopped having breakfast because we cannot manage to buy sugar and bread,” he told IRIN.

Since Malawi started experiencing severe shortages of fuel and foreign exchange currency earlier this year, soap, beans, dry fish, bread, sugar and cooking oil have become luxuries for Tambula's family, and even affording maize, Malawi’s staple food, has become a struggle.

The Famine Early Warning Systems Network (FEWSNET), which monitors trends in staple food prices in countries vulnerable to food insecurity, noted that in southern Malawi, maize prices rose by 22 percent in September and a further 15 percent in October.

According to a cost-of-living survey released every month by local NGO the Centre for Social Concern (CFSC), the price of maize increased by an average of 11.7 percent during October in the country's four main urban centres (Mzuzu, Lilongwe, Blantyre and Zomba).

"The fact that the staple food is recording alarming price increase is indicative of hard times ahead," noted CFSC's researchers in a 15 November press release. "It is a wake-up call to government and other stakeholders... to monitor the situation closely for timely interventions as the upcoming lean season might be more than what the country might have known in previous years."

In an attempt to address Malawi's thriving black market trade in US dollars, which has contributed to the crippling shortage of foreign exchange, the kwacha was devalued by 10 percent in August, but according to the CFSC, income levels have remained stagnant and the cost of goods and services has continued to climb.

Resources Stretched

Collen Kaluwa, an economics professor at the University of Malawi, said the country's economic crisis had stretched the resources of Malawi's city dwellers to breaking point.

“The shortage of fuel has caused hiccups in transportation, making commodities expensive. Forex shortages mean that manufacturing companies are not able to source sufficient inputs for production, hence we are bound to have shortages of commodities in shops and this is also pushing prices up,” he explained.

Kaluwa agreed with recommendations by the International Monetary Fund (IMF) that Malawi's central reserve bank needs to further devalue the kwacha if it is to address the foreign exchange shortage.

Economic mismanagement?

Concerns over poor governance and economic mismanagement by President Bingu wa Mutharika’s administration have seen international donors - including the UK's Department for International Development (DFID), the US-based Millennium Challenge Corporation (MCC), the European Union and the World Bank - either freeze or terminate assistance to Malawi, which relied on foreign aid for up to 40 percent of its annual budget.

In response, the government passed a "Zero Deficit" budget in July 2011 which included 16.5 percent Value Added Tax (VAT) on many commodities that were previously excluded including bread, meat and milk, a move that has further eroded the purchasing power of the kwacha.

“The bad policies the government followed, be it economically or politically, have had adverse, negative [effects] on the poor,” Kaluwa said.

President of the Consumers Association of Malawi John Kapito said the economic situation in Malawi had reached “indescribable levels”.

“People are listening to every statement the authorities are making, hoping that they are going to say something that would bring hope. But at the moment there is nothing Malawians are hoping for,” he told IRIN.

Without a rapid and significant improvement in Malawi's economic outlook, widespread job losses are expected, according to Chairperson of the Employers Consultative Association of Malawi (ECAM) Aubrey Chikunga. “Companies are informing us that they would be shutting down because production has gone down. There is no forex and fuel; the country is also experiencing low power supply which is affecting production,” he said.

The IMF is currently in discussion with Malawi about reviving an extended credit facility programme aimed at mitigating the effects of foreign exchange shortages; it was suspended in June 2011 because of the governments' failure to meet the needed conditions.