Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Malawi says Aug inflation eases to 7.2 pct year-on-year

Tue 25 Sep 2007, 10:05 GMT

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By Frank Phiri

BLANTYRE (Reuters) - Malawi's headline inflation eased to 7.2 percent year-on-year in August, compared to 7.4 percent in the previous month, largely due to lower food prices, its National Statistical Office said on Tuesday.

Food inflation, which accounts for 58.1 of the impoverished impoverished southern African nation's Consumer Price Index (CPI), dipped to 6.6 percent from 6.7 percent in July, the NSO said.

Malawi has had a bumper maize crop this year, helping to lower the cost of the key staple. The country had a surplus of 1.3 million metric tonnes of maize in the 2006/2007 growing season, more than three times the surplus in the previous year.

Economic analysts, however, expressed concerns that rising fuel prices could force Malawians to dig deeper into their pockets to cover higher transport and farming costs, reversing the gains made on the inflation front.

Malawi, a landlocked nation with no oil refineries, is a net importer of fuel. The government announced last week a sharp increase in the price of petrol, blaming the move on the rising price of oil on international markets.

"The fuel hike will hit farmers because it is peak time for agriculture when inputs need to be transported to farms and produce to markets to fetch money for buying the inputs," Andrew Kumbatira, an economic analyst in Malawi, said.

The Reserve Bank of Malawi has eased the pinch with a more accommodative monetary policy. Last month the central bank cut its bank rate to 17.5 percent from 20 percent, citing the improved outlook for inflation and other economic fundamentals.