Malawi sees inflation at 9 pct maximum: finance minister

Malawi's headline inflation is likely to be 9 percent or lower in the coming 12 months due to more stable food prices, its finance minister said on Thursday.

Inflation in the southern African nation's agro-based economy hit a two-year peak of 10.1 percent year-on-year in January, before retreating to 8.4 percent in June.

"For the next 12 months we think it will continue to be 9 percent if not lower," Ken Kandodo told Reuters on the sidelines of an Afro-U.S. trade meeting in the Kenyan capital.

Food inflation in Malawi is heavily dictated by changes in the price of the country's staple, maize, which accounts for about 58 percent in the consumer price index.

Kandodo said the country has a surplus of maize due to good rainfall in recent years. "This year we are sitting on a surplus maize production of about 1 million metric tonnes that we need to find a market for," he said.

The minister added production of the crop is likely to be maintained at last year's level dependent on weather.

"Last year we had just below four million metric tonnes of maize and we think that can be sustained, provided we get good rainfall," Kandodo said.

The global downturn had cut demand for Malawi's other exports like tobacco, the minister added.

"We are very concerned and we have been affected ... demand for our commodities has gone down because of the recession in the West," he said.

Efforts at diversifying the economic base to cushion against such falls in demand would however take time to achieve.

"We are looking to the mining sector, to the tourism sector, but this cannot be in a year or two," Kandodo said.

He added that the government has received interest from investors wanting to be involved in the fledgling mining sector. An Australian firm, Paladin, has started mining uranium.

"We have big prospects for coal, titanium and gold," the minister said adding that the uranium mine will help in terms of export earnings.

Kandodo said the economy is likely to expand at a rate of 7.9 percent this year compared with 9.7 percent last year.

"All the fundamentals are under control. Interest rates are about 15 percent, which is low from our history," he said.