Economic think-tank, the Economics Association of Malawi (Ecama) has reiterated the need for economic diversification, saying an ever widening trade balance and heavy reliance on particular traditional commodities such as tobacco continue to stifle economic growth strides.
In an interview Ecama president, Lauryn Nyasulu, said the country needs to invest in tradable products with higher value added impact and diversify the export products.
Recent figures from World Bank’s World Integrated Trade Solution’s show that Malawi had total exports amounting to $883.9 million (about K654 billion) and total imports at $2.5 billion (about K1.8 trillion) leading to a negative trade balance of $1.7 billion.
The country’s trade growth was recorded at -2.34 percent compared to a world growth of 5.68 percent.
Figures from the International Trade Centre (ICT) trade map also shows that Malawi spent $335.1 million (about K248 billion) of foreign exchange in accessing various services from the rest world in 2019.
The country, however, earned $179 million (about K132 billion) by exporting various services to the world resulting in a $156 million (about K115 billion) trade balance in trading services between the country and the world.
Nyasulu said the country needs to identify local value chains through which, higher value added offerings could be developed.
“For instance, seed and vegetable oils are among products with high export potential. This does not only provide room for increasing export value but also has high diversification potential. Groundnuts and soya bean are among products with very high value added impact.
She, then, said the country needs to address supply side constraints if it is to take a right direction towards diversifying the economy.
Corporate and finance strategist, James Kamwachale Khomba, said in an interview Tuesday that there is need to enhance production and tame the appetite for imports.
“We have a huge appetite for foreign products which we need to change. We need to go back to producing and explore more foreign markets where we can sell our products.
“For over 26 years we have been closing down industries and our industrial sites have turned into industrial cemeteries. We also need to synchronise skills development to production or wealth creation,” Khomba said.
Malawi is an agrarian economy, with about 80 percent of the population living in rural areas.
Tobacco remains, by far, Malawi’s top foreign exchange earner, although its share has been falling sharply in the past ten years in response to changes in prices and weather conditions, and most recently, due to the global anti-smoking campaign championed by the World Health Organisation.
In the 2004 Malawi Economic Growth Strategy, agriculture was stated to account for 39 percent of GDP, 85 percent of the labour force and 83 percent of foreign exchange earnings.
In 2010, the Malawi Confederation of Chambers of Commerce and Industry (MCCI) stated that the sector contributed about 33.6 percent to the economic growth.
In 2017, agriculture accounted for about one-third of GDP and about 80 percent of export revenue.
Agriculture sector’s contribution to GDP was expected to shrink by 0.2 percentage points in 2019 from 27.3 percent to 27.1 percent according to National Account figures.