Simwaka warns of El Niño risk as Malawi inflation continues gradual decline

Malawi’s headline inflation eased to 21.1% in June, down from 23.4% in May, in a decline driven primarily by falling food prices, according to an analysis by Kisu Simwaka, Deputy Governor of the Reserve Bank of Malawi and a prominent economist, shared on Facebook. Food inflation fell sharply to 14.7% from 17.6% the previous month — a marked retreat from the peak of 44.9% recorded in January 2024 — reflecting an improved harvest and better food supply, Simwaka wrote. Non-food inflation, however, has proved far more resistant to the broader disinflationary trend, easing only marginally to 32.1% from 33.0% in May, a level Simwaka noted was little changed from the 33.2% recorded three months earlier.

The distinction matters for how the numbers should be read: non-food inflation captures fuel, transport, rent, imported goods and, crucially, inflation expectations, categories that respond more slowly to improved harvests and more directly to exchange rate pass-through and import costs. Malawi’s headline rate has remained above 20% since June 2022, having peaked at 35% in January 2024. The Reserve Bank of Malawi responded by raising its policy rate to 26% in February that year — a move Simwaka described as painful but effective, with headline inflation falling to 27% by November 2024.

The disinflation path since then has been volatile rather than linear: inflation rose to 30.5% in March 2025, eased to 27.1% by June, spiked again to 29.1% in October, then fell for five consecutive months to 23.8% by March 2026. That sustained decline gave the central bank sufficient confidence to cut its policy rate to 24% in May. An uptick to 24.3% in April, attributed to a fuel price increase on 1 April, proved temporary, with the rate resuming its downward trajectory to reach 21.1% in June.

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Simwaka attributed the renewed momentum to lower food costs and stable fuel prices, while cautioning that persistent non-food inflation continues to reflect incomplete pass-through of earlier exchange rate adjustments, along with inflation expectations that have yet to fully reset downward. Looking ahead, Simwaka projected headline inflation would continue easing through the second half of the year, potentially reaching single-digit teens by the fourth quarter — a forecast he qualified as contingent on adequate food supplies, a stable kwacha, and no re-acceleration in global prices. He identified the principal near-term risk as a forecast El Niño event, which threatens reduced rainfall across Malawi’s southern districts and could disrupt the next harvest.

Simwaka called for pre-positioning of agricultural inputs, expanded irrigation support and the early build-up of strategic grain reserves while domestic and regional prices remain low, arguing that early action now would be considerably cheaper than a reactive response later. Simwaka’s analysis concluded that while the trajectory from 35% in January 2024 to 21.1% in June 2026 represented meaningful progress, Malawi remains well short of price stability, with the harder task — bringing inflation into single digits and anchoring it there — still ahead. He noted that the Reserve Bank’s continued communication with the public forms part of how it anchors inflation expectations, alongside its policy actions.

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