The delicate dilemma of declining maize prices

The Reserve Bank of Malawi’s (RBM) optimistic inflation outlook projection for the near-term is yet to be tested as maize prices continue declining while prices for other goods keep rising. As the Centre for Social Concern (CfSC) observes, on the one hand, easing food inflation could strengthen arguments for maintaining or cautiously easing the tight monetary stance, especially if headline inflation shows signs of deceleration. On the other hand, inflationary pressures from fuel, electricity, taxes and exchange rate vulnerabilities remain strong.

Business Reviewobservation shows that maize prices have been falling, averaging K45 000 per 50 kilogramme (kg) bag on account of increased supply. During the same period last year, the prices were averaging K100 000 per 50kg bag. However, on January 1, the Malawi Government has rolled out a value-added tax (VAT) increase from 16.5 to 17.5 percent and introduced a new threshold on Pay As You Earn (Paye), which have eaten into wages for workers, wiping out their disposable income.

The Malawi Government also increased fuel pump prices of petrol and diesel by an average of 41 percent and adjusted electricity tariff by 12 percent. Given this context, CfSC economic governance officer Agness Nyirongo observes that a premature loosening of monetary policy would be risky as lower interest rates in an environment of cost-push inflation could fuel demand without addressing supply-side constraints, potentially reigniting inflationary pressures. “The likely stance, therefore, is one of continued cautious tightness, with the central bank prioritising price stability while closely monitoring food price trends and fiscal developments,” she says.

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Nyirongo says while declining maize prices are likely to temporarily ease food inflation and mcontribute to a moderation in overall inflation in the short-term, for many households the relief feels partial, fragile and not easily reversible as life itself has become more expensive. She says: “In other words, Malawi may experience disinflation without affordability, a situation where inflation numbers improve on paper, but households continue to struggle. “For low-income households, maize prices matter, but so does income stability.

With wages largely stagnant and informal incomes highly unpredictable, K40 000 remains out of reach for many families when combined with rising costs of cooking oil, sugar, transport, rent, school fees and healthcare.” As such, the fall in maize prices offers psychological relief more than structural relief. It slows the bleeding, but does not heal the wound. Malawi’s annual inflation rate eased to 28.4 percent in 2025 from 32.2 percent in 2024, buoyed by falling food prices.

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