Trade deficit still wide, exports decline—report

Revitalizing Malawi’s Economy: Strategies to Narrow the Trade Gap and Fuel Export Growth

Post was last updated: December 11, 2025

Key Business Points

  • Malawi’s cumulative trade deficit has increased by 16 percent to $2.2 billion, straining the country’s external position, which requires urgent attention from the business community to improve export performance.
  • The trade gap is largely driven by weak sales of key export products such as tobacco and sugar, highlighting the need for diversification and value addition to reduce reliance on traditional exports.
  • To rebuild resilience, Malawi needs coordinated reforms across fiscal, trade, and monetary policy, including export diversification, stronger value addition, and efficient repatriation of export proceeds, as emphasized by economists.

Malawi’s trade deficit has worsened, with the cumulative deficit for the 10 months to October this year jumping by 16 percent to $2.2 billion. According to the Reserve Bank of Malawi (RBM), the October merchandise trade gap widened to $228.7 million, driven by a 36.5 percent rise in imports, which offset the 3.5 percent rise in exports. The deficit was primarily due to weak sales of tobacco and sugar, which were recorded at $55.5 million and $4.3 million, respectively. However, sales of pulses and groundnuts rose to $1.3 million and $900,000, respectively.

Despite the widening trade gap, Malawi’s foreign exchange reserve position slightly improved in October, with total reserves rising to $526.8 million, equivalent to 2.1 months of import cover. However, economists caution that the improvement is fragile, and the increase in reserves does not reflect an underlying recovery in export performance. Scotland-based Malawian economist Velli Nyirongo emphasized that rebuilding resilience requires coordinated reforms across fiscal, trade, and monetary policy, including export diversification, stronger value addition, and efficient repatriation of export proceeds.

Export Development Fund (EDF) managing director Frederick Chanza noted that the core weakness is not merely weak export receipts, but Malawi’s chronic failure to produce at scale. He stressed the need to build scale and restructure trade by financing industrial parks, mining projects, and high-value processing. Mzuzu University economics lecturer Christopher Mbukwa attributed the rise in the deficit to both structural and transactional weaknesses in the economy, including the drop in sales of tobacco, groundnuts, and tea.

To address the trade deficit, Malawi’s business community needs to focus on export diversification and value addition, as well as efficient repatriation of export proceeds. As Chanza emphasized, "If we are going to restructure our trade and narrow the deficit, we must build scale." This requires a concerted effort from the private sector, government, and development partners to support the growth of industries such as manufacturing, mining, and agriculture. By working together, Malawi can reduce its reliance on traditional exports and build a more diversified and resilient economy. As the Chichewa proverb goes, "Kukonda njala, kukonda mtengo" (to reduce poverty, reduce dependence on others), Malawi’s business community must take a proactive approach to address the trade deficit and promote economic growth.

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Vanessa Banda
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