Malawi’s trade deficit worrisome - The Times Group Malawi

Malawi’s trade deficit worrisome – The Times Group Malawi

Post was last updated: March 17, 2020

Malawi’s growing appetite for imports continues to negatively affect trade performance, a situation commentators fear would worsen if the country does not diversify its export base.

Figures contained in the Reserve Bank of Malawi (RBM) 2019 fourth quarter Financial and Economic Review show that trade balance deficit widened to $446.5 million from a deficit of $399.9 million in the previous quarter.

Exports were estimated at $296.2 million in the fourth quarter of 2019 compared to $327.1 million in the preceding quarter and US$255.2 million in the corresponding quarter in 2018.

RBM attributed the decrease in exports to a seasonal downtick in agricultural export commodities.

During the period under review, imports were estimated at $742.8 million from $726.9 million in the previous quarter and $725.3 million in the corresponding quarter in 2018. This was, however, a slight improvement from the $470.1 million deficit recorded in a corresponding quarter in 2018.

In an interview yesterday, finance and corporate governance expert James Kamwachale Khomba said the situation is man made. He said Malawi needs to make radical strides in diversifying her export base and cut on appetite for imports.

He said there is a lack of deliberate policies that would spur local industrilisation that has turned Malawi into a dumping site for foreign goods.

“Unfortunately, we are creating jobs for those countries. We should promote the local industry and minimise the imports. “We need political will. If leadership is not doing anything, there is no way the industry can react, otherwise we will keep importing,” Khomba said.

For several years, Malawi has been experiencing negative trade balance due to growing appetite for foreign goods and continued reliance on imported inputs for  production.

On the other side, agricultural products continue to dominate Malawi’s export basket, accounting for about 80 percent. This is despite the country having strategies such as National Export Strategy, Malawi Growth and Development Strategy (MGDS) and Buy Malawi Strategy aimed at facilitating import substitution.

Using the MGDS III, the government plans to narrow the trade deficit two percent of gross domestic product in 2022 from 2.5 percent in 2018.

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